of expenses.
That’ s bad news because it means an emergency will make going into credit card debt an enticing option, especially if it’ s not possible to borrow from friends or family or cut back on spending.
“ You have to build your savings first before concentrating on debt,” says Steve Repak, a Charlotte, North Carolina-based CFP professional and author of“ 6 Week Money Challenge.”
He suggests building your short-term savings to at least $ 500 while making only the minimum payments on your existing credit cards before you start concentrating on your debts. That way, you can tap your savings instead of swiping your credit card if you have an unexpected expense.
“ For consumers that have debt and their income isn’ t high enough to save anything, they either have to reduce expenditures or increase their income, and the best-case scenario would( be) to do both,” Repak says.“ Supplementing your living expenses using credit cards cannot be a solution.”
Who this strategy is good for: Potential layoff victims.
6. SWITCH TO CASH If your goal is to pay off your credit card debt, the last thing you want to be doing is adding to that debt by continuing to charge your expenses.
“ Quit using your credit cards,” Repak says.“ It seems like a no-brainer, but sometimes it is easier said than done.”
Paying with cash not only prevents you from accumulating more debt, it can also help you spend less overall because of the psychological pain of handing over those $ 20s.
Switching to an all-cash spending plan can help you cut spending by as much as 20 %. It requires you to plan ahead and makes certain purchases-- like the ones you make through the Amazon app on your phone-- inconvenient if not impossible, so you’ re less likely to make them.
Who this strategy is good for: Anyone who can’ t trust themselves with a credit card.
When it comes to eliminating debt, there’ s no such thing as a quick or easy fix. But that won’ t keep people from trying. And that’ s what keeps debt reduction services in business.
Robert Rhinesmith is a Registered Investment Advisor, Applewood Capital Management Associates, LLC.
32 HimPower August 2017