Debt in the United States is like that cancer that is slowly eating away at otherwise healthy families across the country. In 2013 alone, the average American family owed over $15,000 on their credit cards. Although there has been some talk of Federal regulations on credit card interest rates, these companies continue to charge upwards of 20% annually, making it hard for families who can only make the minimum payments. Impulsive purchases and unemployment are like unhealthy starches that feed the cancer.That being said, is the solution simply cutting up your credit cards as so many financial gurus like to preach? Not at all. Credit card debt is the symptom, not the cause. The cause is uncontrolled and foolish spending. A good doctor doesn’t just give pain medicine for a headache; they try to figure out what is causing the headache. So how can this disease be treated?
Cutting up credit cards is not the way to go. You might avoid getting more debt for a while, but living like a pauper for any extended period of time is hard to keep up. Most people who take extreme actions like that usually end up quitting after a short while and going back to their old spending habits. So moderation is the key. Instead of not spending any money at all, just try to stop spending it foolishly. For example, find a cheaper cell phone provider or a cable company that charges you less each month for a comparable service. With the money that you save monthly, start paying off your debts. If you want a cup of Starbucks every now and then, go for it- little things that that keep us happy and motivated.
Cutting up credit cards, getting rid of cable service entirely, and wearing pants with holes in them (just to avoid buying a new pair) are not stops on the road to financial success. The road to financial success is about not wasting money with uncontrolled and foolish spending.
So how can those American families with over $15,000 in credit card debt get where they need to be financially speaking? Like any emergency surgeon will tell you, the first step is to stop the bleeding. Some families need to stop spending money unnecessarily. Then, they can use the money saved each month to pay off the debts as quickly as possible, perhaps using the “Snowball Method” that has become so popular. This is where momentum is built up by paying off the lowest debt first and then knocking out the rest one by one. After paying off their credit cards, families can use extra money each month to invest in their future.
Learn to treat the disease, not the symptom. Instead of cutting up credit cards, learn to stop hemorrhaging money out the door and to take control of your finances!