If you weren’t in debt going into the pandemic of 2020, chances are you’re leaving with some — maybe a lot. Between receiving little support from the government and many businesses closing their doors for good, people have had to do whatever it takes to keep food on the table. And if that meant running up credit card bills to worry about later, then so be it.
While some credit card companies offered forbearance on payments for a time, that period is gone. Whether you are still struggling financially or not, your credit card debt is a drain on your finances that isn’t going away anytime soon.
Debt Levels and Wealth Impact
You might think that if you can handle the minimum payment, carrying substantial credit card debt isn’t that big of a deal. But when you charge something and carry your balance over to the next month, you not only pay the purchase price, you pay interest on top of it. The longer you hold onto the debt, the more you pay for each item you buy. Before you know it, the debt is so large that it becomes nearly impossible to shake. It simply becomes a bill you pay each month for the unforeseeable future.
Even though you make your payments each month, only a portion of it is reducing your bottom line. Most of your minimum payment goes toward your accrued interest for the month, so it’s like you’re taking two steps forward and one step back.
The problem is that you’ll never get ahead that way anytime soon. In fact, carrying debt will keep you living paycheck to paycheck and make it very difficult to grow substantial wealth. So, that nest egg that could help during the next emergency won’t be there when you need it.
Where You Want Your Money to Go
Instead of your money going toward interest and giving you nothing in return, you want to arrange your budget, so you have extra money to grow. Investing in the market or real estate is a promising way to build and diversify your wealth, but if you pay more in interest than you make, it’s not worth your time.
You need to get rid of your debt so you can make interest on your money, not pay the interest out into the void. In addition to tackling your debt, you also need to retool your budget. Increasing your income and cutting costs are good first steps to freeing up cash you can use to pay down your debt quicker and open up investment opportunities that make sense for you.
Consolidation Could Be the Key
Once you adjust your income, decrease your expenses or both, it’s time to make a plan, and tackle your credit cards. If you have multiple credit cards, this is especially important because you’re paying numerous minimum payments every month. One way to solve that issue is through debt consolidation. Companies like Johnson Funding look at your eligible debt and offer consolidation loans to roll that debt into one obligation.
That won’t pay off your debt right away, but it will give you one interest rate and a single loan payment, which simplifies your liability and shines a light at the end of the debt tunnel. Keep in mind when you consolidate your debt, you don’t want to continue using your credit cards because that will just grow more debt you don’t need.
Stay Out of Debt to Build a Brighter Future
Just because you had to depend on credit cards to get by during a hard year doesn’t mean you have to shoulder that debt for the rest of your life. Making a financial plan and getting help where you need it are the key steps in finding your way out of debt and staying there for good. Contact Johnson Funding to see how they can help you with your financial situation.