There are a lot of people out there who will tell you how to get out of debt. They have tricks and systems, like only use cash, but what they don’t address is the fundamental question of why you got into debt. To answer that question, you need to go deep into your psyche and ask yourself this question, why did I buy something I couldn’t afford?
I know what you’re thinking…judgey.
It’s not meant that way. Some debt is good. Mortgages. Student loans (sometimes). That kind of debt can be justified as a long term investment in your future. Plus, interest rates are in the single digits. But credit card debt is not like that. Credit card debt is evil. Credit card debt is a massive middle finger rammed straight up…you get the idea. Twenty five percent interest ought to be illegal. No, really, it should. Elizabeth Warren has talked about making it illegal but it’s not going to happen because we Americans love our credit and the system is rigged to make you love it.
Think about the advertising aimed at getting you to overspend. Going to Italy with your kids on a trip you can’t afford? Aw. Priceless. Says Mastercard, right before they hit you with ruinous interest rates.
Visa, it’s everywhere you want to be. No wonder you can’t escape it.
And if you don’t pay your balances down, you really can’t escape it. Consider the math:
You rack up $1,000 on your card that you can’t pay immediately. No big whup. Just pay the minimum every month but, looky here, at the end of the year you owe $1,250, assuming a 25% interest rate. Has the shit you bought appreciated by 25%? Hell no. Most likely it’s worth pennies on the dollar but your debt has gone dramatically up in value. And next year it will go up even more thanks to the miracle of compound interest. In two years, that $1,000 will be $1,600.
This makes me mad and it should make you mad too. What’s the lesson? DO NOT A BALANCE ON YOUR CREDIT CARD. Ever.