As of April 2023, the average American is holding about $5,200 in debt. Couple that with the average credit card interest rate of a little more than 24% and many think paying down their debt is nearly impossible.
Financial planner, Rick Salmeron, of Salmeron Financial highlights some real-life moves consumers can take to climb out of bad debt and recognize what good debt is.
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WATCH HERE- Urgency! Since interest rate rises are now much higher, this environment helps light a fire under our fannies to focus on paying off these debts. Use this energy to your advantage!
- Know Your Debts. List them all, in interest rate size order! From largest to smallest. This creates targets to shoot at. It’s what I call the Credit Card To-Do List. Knock ‘em off one at a time. Visualize them gone!
- Treat the Interest Rate Like It’s a Rate of Return. Paying off a 16% high-interest credit card? That’s like getting a 16% return on your money! Seen that way, you are more motivated to chase after that return and not spend money elsewhere.
- Send In All the Troops. Call for an all-safety blitz approach to attack the debts. Direct as much income as possible against plastic! Smother it all. Extinguish each! Highest rate first, then the next, then the next…..
- Consider the Zero-Balance Transfers. If you’re eligible for them, and you are disciplined and can manage them, this can be a faster way to pay off!
He hopes that people start with a game plan to ensure they can get to a more stable financial footing.
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“Knowing what you’re attacking is a great move in the direction that you want to go,” Salmeron said. “Remember, there are the bad debts – those that prevent us from growing our wealth. Think credit cards, discretionary personal loans, payday loans, etc. Then there are good debts – those that help us grow our wealth like mortgages, certain real estate investment loans, student loans, and others. I would *not* recommend that anyone borrow from their home to invest in the stock market, or other volatile ventures. Asking for trouble creating that house of cards!”
