All about the challenges of Midlife Finance

Credit Card Debt

Credit Card debt is one of the worse thing you can saddle your family with. Unfortunately, the average American household carried a $7,400 credit card debt in 2010. The interest on these credit cards range anywhere from 10% to 30% depending on your credit score.

If you carry any credit debt, you need to get rid of it as soon as possible. The high interest rate should discourage you from carrying a balance. You are just enriching the greedy banks.

Here is one strategy that can help you pay off credit card debts.

Debt Snowball

  1. List all your debts out and order them from small to large.
  2. Pay the minimum payment on all the debts.
  3. Put any extra money toward the smallest debt.
  4. Once the first debt is paid off, then apply your effort to the next one on the list.

This is not the most optimal way to pay off debts because we didn’t take the interest rate into account. But once you paid off that first smallest debt, you’ll get a taste of success and see how having less debt can free up the cash flow. Many people don’t realize how much money go to the interest each month and just pay the minimum amount.

Another alternative is to pay off the highest interest debt first.

If you have any credit card debt at all, you need to pay them off first before doing any kind of investing. Don’t give your money to the big banks for free. All these interest payment could go toward you kids, house, retirement, or a number of other things instead.

 

 

 

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