Debt Reduction Made Simple: Tackle Credit Card Debt Now
Hi there, I’m Professor Alex. All right, so what are we talking about today? I saw an article the other day about credit card debt, and it inspired me to go over this issue of credit cards and saving money. First and foremost, understand that you’re not alone if you’re feeling overwhelmed with credit card debt.
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Key Points:
- Credit card debt is at an all-time high.
- The best time to start saving money is now. Cut unnecessary expenses.
- Use the snowball method to tackle smaller debts first.
- Consider balance transfers to lower interest rates.
- Start preparing for retirement now with small contributions.
I hear you. Your credit card debt is high, and you’re struggling to make payments. You’re not alone. Look at these numbers: $27 billion more is owed on credit cards today than at the same time a year ago in 2023. We are at an all-time high of credit card debt at $1.14 trillion.
The average household credit card debt is $6,329. I hope you can continue making those payments so we can pay off those debts and start towards financial freedom, which is what this podcast is about.
First, I want to comment on all these stories online about side hustles making $50,000 a month. I’m like, is everybody making half a million a year? Am I the only guy not doing this? By the way, why would you make so much money on a side hustle and not make that your only hustle?
So, other than these side hustle geniuses making $80,000 a week, the reality is that making money, saving money, and putting that money away takes time. Realistically, it’s not sexy, and I honestly mean that.
The Debt-Free Journey
You know what’s sexy? Going out and buying a new watch or getting a new phone, or computer. I’m actually using a new computer now, and guess what? It’s sexy. I ordered my laptop online, and it’s in my hands within three days. It’s beautiful, it’s sexy, and I can look at it. But the truth is that we are used to instant gratification.
Is it sexy to save $100 every month for a year, maybe $200 next year? No, it’s boring. It’s only going to be sexy when you’re old and have all these gray hairs like I do, and then suddenly you have a big chunk of change. Now it’s sexy, but it was boring for all that time.
So, I want to say it takes time. Rome was not built in a day. Little by little, you’re going to start saving money. Now is the perfect time to figure out what you need to do to cut corners and start saving money. Start paying down your debt because interest is a killer. Whatever you pay in interest rates—$200, $300, $400 a month—it’s time to tackle it.
That’s $200, $300, or $400 a month that could go towards savings plans like an IRA or 401(k). So, it would be best to get that interest down, the quicker, the better. Now, here are a couple of tips to get on track.
The reality is that saving money is like earning money. If you save $20 today, that’s $20 you don’t have to work for. It’s free money. So, however you can save money, do it. I started doing it years ago. In 2016 or 2017, I had had enough of cable television. I was paying close to $300 a month to watch a couple of channels. It was ridiculous. It still is!
I was living with my mom at the time because my dad had just passed away, and I had moved in to help out. Eventually, I told my mom we would use local channels with old rabbit ears because paying $300 a month was crazy. That’s $4,000 a year!
I started streaming using Netflix and Amazon Prime, saving thousands of dollars per year. You’d be surprised at the little areas where you can cut corners and start saving money. Imagine cutting cable and saving $300 a month. At the end of the year, you have $4,000. Enjoy $2,000, take a cruise or a family trip, and save the other $2,000. You work hard; you deserve it. But you have to start with saving money now.
The Snowball Method to Eliminate Credit Card Debt
Who doesn’t love a good snowball fight? I know it’s hot here in the Sunshine State, but I hope to see some snow in December. However, one popular way to reduce debt is known as the snowball method. It starts small and gets bigger.
For example, if you have three credit cards with balances of $1,000, $2,000, and $3,000, pay off the credit card with a balance of $1,000 first. You’ll see giant leaps because that credit card bill will go down to zero, unlike the $3,000 one you’re paying little by little and will take longer to pay off.
Start small. It’s a controversial method, but it’s an excellent way to start catching up and getting rid of debt. Once you finish that, you’ll have more money for the second and third credit cards. Keep the snowball method in mind.
Credit Card Balance Transfers to Start Saving Money
Credit card balance transfer interest rates are dropping every day, and a very quick and easy way to save money. Every day, I get promotional emails from the bank asking, “Hey, do you want to transfer?”
Many times, it’s 0% interest for 12 or 18 months on transfers. Consider how much money you save if you’re not paying interest for 18 months. That could add up. Get that money and put it in an IRA account. Even if you can’t put $5 in there this month, it doesn’t matter. At least it’s there when you have a few bucks saved.
Pay down these credit cards and then start contributing the max if possible, to a retirement account. At my age, the max is $7,000. Figure out what the maximum is. You’re going to love it. You’ll thank me when you’re old and have all these gray hairs, but you’re traveling the country in your RV.
Debt Consolidation with a Personal Loan
Consolidate your debt with a personal loan. Personal loans typically have a lower interest rate, sometimes more than half. So, if you’re paying 29% on the credit card, but the personal loan is 12%, consider how much you’re saving. Combine everything into one monthly payment and knock this baby out in the next three to five years.
It all starts today. Take these steps now. You won’t regret it. I don’t care how you do it; just do it. There’s no better time than the present. Take care of yourselves, and continue towards that path of financial freedom and your debt-free journey.
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This podcast transcript was edited for clarity.
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