The Debt Hangover

 

A lot of people are suffering from that debt hangover right now. We’ve been through a shopping season with Christmas, and so we have that hanging out there. We need to address it, because the secret to good financial health is to get out of consumer debt.

 

Right now, for people who are carrying debt, the average household credit card debt is $15,355. That’s a lot. The average interest rate on those credit cards is 15%, but if you have poor credit those rates could be up to 30% which makes it almost impossible to get out of it.

 

How do you cure that hangover? Well, not with the hair of the dog, let me tell you. You have to do it the hard way. Collect all of your statements. I always say to set up a table and really get it in front of you. List every account. List every balance so it’s right it your face. List the interest rate on each card and the minimum payment.

 

Then, you need to ask the question: How much can I afford out of my household budget to apply to those credit cards each month? You need to pay the minimum on each card except for one. I usually tell people to start with the small balances, because that’s a little victory you can have. Then, get rid of the high interest credit cards next, and just work your way down one card at a time. Once you get rid of one card, that money you can apply to the next one.

 

Know that if you have overindulged for years, it may take years to correct; but if it’s just a holiday thing, you should be able to clear it out in three to four months. If you fall off the wagon, just get back on.

 

Also, consider a balance transfer card for relief. There are still some out there. Often they will offer a 0% interest rate for a teaser period. Just mark your calendar, because those rates will go up.

 

Remember that the key to a financially healthy you is to get rid of credit card debt, and until you do, you’ll never be able to save and invest. With a little discipline and a little time, you can knock it out, and it’s a great feeling because that money is going to be more money in your budget to enjoy life and save for the bigger things down the road.  

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