While you probably spent less during quarantine than you would have in any other year, you still had expenses in your budget. But with rising unemployment and the instability of the market in general, maybe you had to use credit cards to make ends meet. And with the holiday season among us, it’s tempting to just charge all those holiday presents. After all, you’re already in debt, right?
But before you use your credit cards for any more debt spending, you might want to reconsider because you end up paying a lot more for everything you buy on credit. What’s more, the bigger the mountain of debt, the harder it is to dig your way out, which can leave you living paycheck to paycheck for decades.
Credit Card Debt
You might not think that credit card debt is a big deal, especially if you can make the monthly payments, but every time you use your credit cards, you’re taking a loan from the bank. And the monthly minimum payments you make on your loans are a drain on your current budget and will remain so for an extended period.
That’s because paying the minimum on your bills barely reduces the overall total; most of that payment applies to the interest you owe the bank for borrowing. So, for every purchase, you aren’t paying the amount on the price tag, you’re paying much more over the life of the credit card loan.
It’s essential to find your way out from under that debt because it can snowball to an amount that’s nearly impossible to eliminate.
Your Future Wealth
To ensure a financially stable future, you want to pay off your debts and create a gap between your income and expenses. Once you do that, you can use the extra money to invest so that it works for you and brings in equity you can use to survive.
Creating the gap is an easy concept to understand, but it’s not always easy to do. Basically, you want to increase your income, decrease your expenses, and pay off as much debt as you can. Increasing your income might be challenging right now, but if you can pick up an extra job to bring in some cash, every little bit helps.
To decrease your expenses, look at each one, only keep the ones you absolutely need and eliminate the rest. Call your creditors and ask if they can lower your monthly payment without penalty for the remaining expenses. You might find them willing to work with you on payments or specials instead of losing you as a customer.
Consolidate and Eliminate
When it comes to your loans, you want to pay off any credit card debts you owe as soon as possible. Carrying these debts while making minimum payments will keep you in a debt cycle that is difficult to escape.
One solution is to have Harrison Funding bundle your eligible debt under one umbrella with a debt consolidation loan. With your credit card debt moved into one loan with a single interest rate and monthly payment, you not only have a clear path to a debt-free life, but you’ll likely free up money you can use to pay your debt off even faster.
On the other hand, you could use the extra cash to invest in the market, real estate, or contribute to your retirement, and prepare for your future. Consult a financial advisor to see which investments are best for your portfolio.
Stay Out of Debt
It’s important to note that no matter how much you spent during this pandemic or what you had to do to make ends meet, there is a path out of debt. And once you begin on the road to living debt-free, be sure to set up your budget so you can stay out of debt for good.