Escaping from Credit Card Debt
Most of us, at some point in our lives, over-spend on credit cards and accumulate more personal debt than we can easily afford to pay off. For Melissa, a recent university graduate and young professional, the problem began in college.
Like most students, Melissa borrowed money in the form of student loans. And as do most students, she also accepted several credit cards. Over time, pressure to repay her student loans mounted, and Melissa used her credit cards for debt repayment: a quick fix, but not a great answer. The last straw for Melissa occurred when she went over the limit on one credit card, and the company increased her 8.9 percent interest rate to 25 percent. It also began assessing a monthly over-the-limit fee. All this, on top of her loan payments, forced Melissa to take action.
Luckily, her boyfriend's father threw her a lifesaver. He advised Melissa to adjust her repayment strategy to contribute more money to the highest debts and less to the lowest ones. He also suggested that she cash in her life insurance policy and trade her new car, with a high monthly payment, for a used vehicle she could own outright.
Susanna Goodman, author of GIRLS JUST WANNA HAVE FUNDS, joined Melissa for a one-on-one money talk. For many young women and professionals, serious debt is common, said Goodman, especially when a credit card can be the light at the end of the tunnel. Goodman advised Melissa to begin her retirement plan, which would give her a tax deduction and allow her to save tax-free. She also praised Melissa for facing her problem head-on, saying people should not feel shame about debt or be nervous about getting help. Instead, they should seek good advice, come up with a solution, and work to accomplish the goals they've set.
Read these great articles about managing your personal finances. And visit our archive to read about other people who are in the same boat.