Stop Living Life on Borrowed Money

Credit Cards, Debt, Retirement

January 23, 2020

I want you to make it your top priority once and for all to be smart and powerful in how you choose to use the money you have, as well as the money you do not have. Too many of us have lived life on borrowed money, spending what we don’t have and racking up credit card debt. Now is the time to change that behavior once and for all.


I want you to embrace a new rule for your money. Your new rule requires you to make it your utmost priority to pay as you go from this day forward. The closer you can get to being able to pay for everything when the bill comes in without incurring debt, the better off you will be.


There is no question that paying off your credit card debt is one of the best ways to grab control of your destiny. When you are paying an interest rate on your credit card balances, it is impossible to feel you are on your path to financial independence.


If you have money in a savings account, it may make sense to use some of those savings to pay off your high- interest credit card debt.


Here’s a basic math lesson to keep in mind whenever you are weighing your financial choices: Always ask yourself if what you are earning in interest is more or less than what you are paying in interest. So let’s say you are earning 2% on your savings account but you are paying 16% on your credit card balance. Hmmm . . . by my math, you’re 14 percentage points down. And to be totally clear, the 2% you are earning on your savings is actually money that is taxed, so what you are really earning after paying tax is going to be less than 2%. So that makes the real gap between your after-tax earnings on your savings and the interest you pay on your credit cards even bigger.


Here’s a rule of thumb: If the interest rate on your credit card is at least four percentage points higher than the interest rate on your savings account, it makes financial sense to use your savings to pay off or reduce your credit card debt.


But once again, I want to stress that you must always— and I mean always— keep the sum of money in your savings account that makes you feel secure. I do not want you to use all your savings to pay down a credit card balance. That makes no sense. Remember fear is one of the main internal obstacles to wealth. If you use all your money to pay down credit card debt and that leaves you afraid, then you are creating an obstacle rather than removing one. So, every move you make with your money needs to leave you feeling more powerful, not less. So, when paying off credit card debt, only use an amount of money from your savings that leaves you still feeling secure and therefore powerful.


But please note: The eventual goal is to have no credit card debt whatsoever and to have an eight-month emergency savings fund. So, after your credit card debt is paid off, take the money you were using to pay it off and put it back into your savings account.


Becoming debt-free is a major step in your path to retirement. I cover this and the other steps you should be focusing on during your working years in my new book The Ultimate Retirement Guide for 50+: Winning Strategies to Make Your Money Last a Lifetime, available for pre-order now.

Here is a peek at Chapter 3: Making the Most of Your Working Years:


If you are still working, you are in a great position to improve your retirement picture because you still have an income to put toward a variety of goals.

For many of you, saving more is a top priority, yet you are struggling to come up with the extra dollars you wish you could be saving.

The solution, my warrior friend, is really quite easy. Stop spending so much. Don’t you “Oh, Suze” me. In this chapter I am going to expose all the ways you are spending more than you need to. I do it with love, and with the hope that you will be excited to consider how changing your spending can give you the money you need to polish up some of your retire­ment goals.

While you may be focused on the need to save more for retirement, I am most concerned that you pay off all your debts before you retire. In Chapter 4 I have a detailed explanation of why I want you to pay off your mortgage before you retire if you intend to stay in your home. But I know for many of you there is also credit card debt lurking, and car payments. That has got to go. Carrying debt into retirement will make it impossible to live the ultimate retire­ment. How can you relax and enjoy yourself if you must spend a chunk of your retirement income each month to make expensive debt payments? In this chapter we are going to explore how to live below your means but within your needs. Does that sound like punishment? You couldn’t be more wrong.

Not only will living within your means leave you with more money to put toward your financial goals, but it will also make your life easier in retirement. If you reduce your monthly spending by $500 or $1,000 a month today, that’s $500 or $1,000 a month you won’t need to generate in retirement. Spending less today reduces your retirement overhead. Not exactly punishment, when you think about the long-term payoff, right?


Remember to follow these retirement tips and more from my new book 

  • Prioritize paying off all debt before you retire.
  • Embrace living below your means.
  • Save more for retirement . . . in the right accounts.
  • Have a plan to work longer.
  • Consider long-term care insurance.

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Suze's Financial Strength Test

Answer Yes or No to the follow statements.

I pay all my credit card bills in full each month.

I have an eight-month emergency savings fund separate from my checking or other bank accounts.

The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!

I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.

I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.

I have term life insurance to provide protection to those who are dependent on my income.

I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.

I have checked all the beneficiaries of every investment account and insurance policy within the past year.

So how did you do?

If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.

As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!

But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.

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