Do you have credit card debt? If so, eliminating this needs to be your biggest focus in order to begin saving money. It’s great to implement our advice to save more elsewhere, however those savings need to be applied towards paying off any/all credit card debt.
Biggest Threat to Your Financial Health
Credit card debt is the most likely culprit to derail your savings and financial health. Most cards charge 18% to 25% interest per year. That is an extremely high interest rate. To put it another way, very few investments can match that return over an extended period of time.
That is a scary thought that your average credit card debt can compound at a higher rate than any investment you could make. The longer your balance remains unpaid, the bigger it gets.
That is why eliminating credit card debt must be priority number one in growing your savings. You should have a small amount of cash set aside for emergencies, but all other savings need to be applied towards paying down your credit card debt.
Options - Consolidation
There are various options to help whittle down credit card debt, one option to consider is consolidation. If you have a large amount of debt spread between multiple lenders you can talk with your lenders to consolidate the debt. Often times you can get a certain amount of debt forgiven.
The consolidated amount is then moved onto a new loan that is charging a lower interest rate. Thus, you save money by paying less in interest on the new loan than you were on the old loan(s), and you potentially could have had some debt forgiven by negotiating with your lenders.
There are multiple lending companies that will offer loans for exactly this purpose, a few are listed below:
SoFi - 3 to 7 year loan terms, balances up to $35,000
Lending Club - 3 to 5 year loan terms, balances up to $40,000
Avant - 2 to 5 year loan terms, balances from $2,000 to $35,000
Eliminate the Highest Interest Debt First
If you don't want to go the route of consolidation, your next strategy should be tackling your debt's one at a time. Focus on paying off the highest interest rate balance first, and then once that is paid off dedicate all of your savings on the next highest rate balance.
Eliminate your most expensive debts one at a time.
Get to Saving
Once this is taken care of you can focus on building your savings up, earning low risk and risk free returns on your savings, and ultimately growing your nest egg!