Destroy Your Debt


By Mark Foster

It’s more fun racking up debt than it is paying it back. But, to have some measure of financial freedom in your life you need to focus on destroying your debt.

 The 2012 NFCC Financial Literacy Survey showed that 39% of adults carry card credit card debt over from month-to-month. Don’t be content with merely paying the minimum due on your credit card debt, or else it could take you decades to pay that debt off and cost you thousands of dollars in interest.

One of the best things you can do to prepare for your retirement is to destroy your debt. The average monthly Social Security check is just $1,230. Imagine trying to live on that amount! About 15% of retired Americans do. Imagine how much easier it would be for you as a retiree to live on Social Security if you had no loan payments or no credit card debt to worry about. And  just over a third (34%) of retirees get 90% or more of their retirement income from Social Security. It’s important to save for your retirement, but that’s another story. Having no debt when you retire will be a tremendous help to you to financially survive.

Avoid getting any new credit when you’re focusing on knocking down debt. It’s hard to put out a fire if you’re pouring gas on it. If you are an impulsive spender, you ought to leave your credit cards at home instead of carrying them around with you everywhere you go. And if you are struggling with debt, you might consider plastic surgery and cut up your credit cards.

Before you make a large purchase, ask yourself, “How many hours did I have to work to buy this item?” or, “will I have to work” if you’re buying it on credit. Knowing that you’d be trading 25 hours of work to buy, for example, a digital camera will help you avoid overspending. You might decide to buy a lesser expensive camera, or to postpone your purchase until later. Reviewing your potential purchases like this can help you to build up savings and destroy your debt.

If you’d like a lower interest rate on your credit card, call and ask your card company. Sometimes companies will lower a card member’s interest rate simply because they’re asked. It’s a free call, so it doesn’t hurt to ask. The company is more likely to lower your interest rate if you have good credit and have a good history of making on-time payments.

Whenever you receive extra money – from a tax refund, raise, or whatever – be sure to have a plan for that money. All too often people treat extra money as though they had won the lottery and carelessly spend most of it. Plan ahead to have some fun with your money, but that the majority of the money will be used to build up your savings and knock down some debt faster.

When you pay extra to destroy your debt faster there are various ways to do it. However, the debt with the highest interest rate is the one costing you the most money in interest so knocking it down first makes sense. Some people choose to destroy the smallest debt first to taste debt-busting success sooner. That approach won’t save you quite as much money in interest, but it can be a very successful approach if it helps you stay motivated to knock out your debts, and when you pay off a debt you roll that payment up into the next debt for faster payoff.

If you need more help in destroying your debt, a Debt Management Program from an NFCC Member Agency such as Credit Counseling of Arkansas can help lower your interest rates, and lower your monthly payments to destroy debt faster. Remember the saying, “If you aim at nothing, you’ll probably hit it.” Destroying your debt is an excellent goal to have.

Mark Foster is Director of Education with Credit Counseling of Arkansas (CCOA). CCOA is a member of the National Foundation for Credit Counseling. Visit CCOA online at www.CCOAcares.com

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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