Credit card debt is your financial worst enemy
02-28-2023
If you owe more than you can afford to pay off in the next six months, then your debt is likely your greatest financial challenge. But that doesn't mean it can't be addressed. There are several strategies that can help you overcome it and achieve your debt-reduction goals. Start by making a list of all your cards, including their balances and interest rates. This will give you an idea of how much you owe and which cards are the easiest to tackle first.
This strategy can be the quickest and most cost-effective way to reduce your credit card debt. It reduces the amount of money you'll spend on interest every month and helps create momentum towards getting out of debt.
You might be surprised by how many items you purchase with your credit card that aren't necessary. According to Ramon de Oliveira, those items can add up quickly and aren't likely to be worthwhile in the long run.
Ideally, you'll want to keep your total debt load under 10 percent of your net income. This ratio includes your mortgage, student loans, auto loan, credit card payments, and other expenses.
When your minimum credit card payments exceed this ratio, it's time to stop using your cards and make a plan for debt reduction.
The easiest way to measure your debt-to-income ratio is by looking at the number of purchases you make on credit each month compared to how much your total income is. This is called your credit utilization ratio, which has the second-largest impact on your credit score.
Another easy way to determine when you've overextended yourself is by analyzing your debt-to-income ratio. This ratio shows how much of your available income is going to debt repayment each month, and it's an excellent indicator when you're a bit overextended on your credit card payments.
It's also important to note that your debt-to-income ratio can vary depending on how much you earn and what type of debt you have. It's best to check your ratio on a regular basis, so you can catch any issues before they get out of control.
