Thanks for reading Finessing Finance. As always, your support does not go unrecognized on my journey to help people with free, accessible personal finance content.
The Stats
Left and right, it seems that inflation is eating us alive. It’s no surprise that many people are struggling with debt as wages remain stagnant and prices rise. Let’s take a quick look at the stats:
Credit card debt has been climbing for close to two years following a decrease during the pandemic: after falling 13% in 2020, debt spiked 9% in 2021 and almost 18% in 2022, a record growth rate, according to Fed data. - Forbes
Credit card debt continues to rise and you may have seen it reflected in your own personal life. These days, I’ll review my monthly credit card statement and wonder how the amount increased so much. I’ve had personal life stage changes over the past few months but I’m looking to pull back now that things are beginning to settle.
The percentage of people who have less emergency savings than a year ago increased since Bankrate asked the question in 2022, when 34 percent of people had less savings year-over-year. - Bankrate
More people are dipping into their emergency savings to pay off debt which shouldn’t be done in any situation. You never know when an emergency could strike and these funds are designed to save you in a pinch. Unfortunately, many Americans are struggling with rising costs and can’t sustain their previous pre-pandemic lifestyle. For any situation, I do not recommend touching your foundational set of emergency funds.
Managing Credit Card Debt
Do you flinch when you see that number on your credit card statement each month? It’s a moment of intense vulnerable pain. Lately, these are the feelings I’ve been managing for myself. Here are some rules for managing credit card debt:
Know your balances and interest rates
The first step in managing credit card debt is to know exactly how much you owe and the interest rate on each card. Make a list of your credit cards, their balances, and their interest rates. This will give you a clear picture of your debt and help you prioritize which cards to pay off first.
Create a budget
Creating a budget is crucial in managing credit card debt. Determine how much money you have coming in each month and how much you are spending. Look for areas where you can cut back on expenses, such as dining out or subscription services. Use the extra money to pay down your credit card debt.
Pay more than the minimum payment
When paying your credit card bill, try to pay more than the minimum payment. Paying only the minimum can result in higher interest charges and a longer repayment period. Aim to pay as much as you can each month, even if it’s just a little more than the minimum.
Consider a balance transfer
If you have multiple credit card balances with high interest rates, consider consolidating them with a balance transfer. A balance transfer involves transferring your credit card balances to a new card with a lower interest rate. This can help you save money on interest charges and make it easier to manage your debt.
Avoid using credit cards for unnecessary purchases
To avoid adding to your credit card debt, avoid using credit cards for unnecessary purchases. Stick to a cash or debit card budget for everyday expenses, and only use your credit card for emergencies or larger purchases that you can pay off in full at the end of the month.
Seek professional help if needed
If you are struggling to manage your credit card debt, consider seeking professional help. A credit counselor can help you develop a debt management plan and provide resources to help you get back on track.
Lastly, if do not be afraid to cut up your credit cards. There’s absolutely no shame in doing this and many people I know in my personal life have done the same. In one workshop, I met a man who returned from nearly $250,000 in debt. He mentioned on Zoom that it was the most grueling process of his life and he will not let himself return to that point.
Fight the good fight!
Have a great week,
Jordan
I recently self published a book "Financial Empowerment: Mastering Personal Finances" to help others learn how to manage their money in simple easy to understand ways. It's available on Amazon, very reasonably priced.