With all of the talk about consumer debt rising and the tough economic times for many, I thought I would spend this blog post covering debt.  I am getting more and more emails and calls about people drowning in debt.  Some of the circumstances vary, but the root causes usually share a common element: lack of a plan.

Millions of people have dug themselves into a hole with credit card debt. If you are in a hole, stop digging. Destroy the shovel. Get rid of your cards so that you do not incur any new debts. In order to solve the current problems, you have to reduce your future problems. This has to be a choice you make. Don’t buy things you cannot afford.

When Elizabeth came to see me she was up to her eyeballs in debt. She was robbing Peter to pay Paul. She had seven credit cards and because of late payments, her interest rates had soared to 30 percent or more on each of her cards. She had accumulated more than $20,000 in debt and couldn’t even afford to pay the interest on the cards. She was then using cash advances to make her monthly credit card minimum payments. My first bit of advice was to cut up all her remaining cards. She had to stop increasing her balances in order to chip away at the current balances.

Perform Plastic Surgery

Credit card debt is one of the biggest obstacles to financial freedom. Credit cards eat up valuable dollars you could be giving away to churches, ministries, and charities. They also prevent you from saving more. If credit cards are a thorn in your side, here are some rules to live by:

Rule 1: Pay off your balance each month.

Rule 2: If you violate rule 1, even once, cut up the card.

This may sound harsh, but believe me, it is the best way to prevent getting into more trouble. The best credit card is one that is being paid off each month. Don’t let the credit card companies take your wealth away.

Dan went to his boss and said, “I need a raise! And it may be helpful for you to know that there are three other companies after me.” “Is that so?” asked his boss. “What other companies are after you?” After a little more prodding Dan replied, “Those would be Visa, MasterCard, and Discover.”

Killing Me Softly with Interest

Have you ever heard the saying “I’m so poor, I can’t even pay attention”? It is so true with credit cards. Most people do not pay attention to the fine print. The biggest financial mistakes that I see on a day-to-day basis mainly deal with credit card issues. It is not so much the balance that is the problem, it is the interest. This is the biggest wealth-killer. If you have even a $10,000 balance at 19.99 percent, this is almost $2,000 a year in interest. That is $2,000 that could have been donated or invested. This adds up over time, especially when you are making only the minimum required payments.

A great blog that deals with ways to reduce debt, save money, and be frugal is: http://beingfrugal.net/

I wrote The Faith-Based Millionaire to help people get out of debt so that they could give more and invest more for their future.  Please send me an email if I can answer any questions for you personally. I am here to serve you, my readers.

Blessings,

Jay