December 06, 2018
You know where I stand on having credit card debt. It holds you back from being all you can, and deserve, to be.
I realize some of you have credit card debt due to emergencies, like a medical bill or car repair bill you didn’t have the cash to cover. I respect that not all of you have credit card debt due to overspending. But, many of you do have unpaid credit card bills because you are living above your means, using credit cards to pay for the “wants” you can’t afford.
That’s never a good idea, but right now it is an even worse deal. Have you checked the interest rate you pay on your credit card bills lately? It is rising. The average rate is now more than 17%, up from 15% a few years ago. And 17% is just the average. Many of you are likely paying more than 20% interest. That is insane.
Even worse, I expect the interest rate you are charged on your credit card bills will rise in 2019. Credit card interest rates move in sync with policy changes made by the Federal Reserve. The Fed has been raising a key interest rate it controls–and that impacts credit cards–for a few years, and is likely to make a few more hikes in 2019.
For anyone with credit card debt, 2019 is the year to tackle it. No more delays. No more excuses.
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.
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.