There's no excuse for not saving for retirement if you're in the habit of being financially responsible. The best thing to do is start small by putting away just $25 per week and gradually increase the amount as your income increases. It matters less how much money you can put into your account when it starts out than how often and consistently you contribute - so get started today!
Credit cards are an important resource for any person with a history of bad credit, but it's also easy to get caught in the cycle of using your card as a bandaid. It becomes too tempting to turn to your card when you're strapped on cash or need some extra money, and over time you can really find yourself feeling trapped by this debt. The truth is that if you ever plan to retire comfortably or at a reasonable age then you cannot afford to abuse credit cards because they are financial cancer.
Living paycheck to paycheck doesn't make for an easy retirement plan. In fact, there is nothing easy about how credit card debt accumulates and grows thanks to high interest rates and long-term unpaid balances accruing late payment penalties. It's not worth the risk of thinking that because you pay off your monthly bill in full every single month that somehow.
My journey out of debt was a long and difficult one. I had to make tough decisions in order to get back on my feet. For example, I decided that any money that my family would have given me for birthdays or Christmas were now going towards paying off credit cards. It took me two years and because life wasn’t always easy it seemed like there were times when I was making no progress at all. But then something clicked inside me, as if someone flipped a switch and just like that the debts started disappearing!
Let’s take an example. The average credit card debt is almost $10,000 per household now. Let’s say you have a $9000 credit card debt balance and the interest rate is 14.9 % which is low for most people. Depending on the company the minimum payment is probably in the neighbourhood of $150/month. If you paid nothing but the minimum payment on that card, and never made another purchase, it would take you 111 months to pay this card off. Almost 10 YEARS to pay off a $9000 credit card debt? That is insanity. It would cost you roughly $16,600 to pay of $9000 in debt.
Let’s take a look at the same balance with some different, and probably more common, factors involved. Take a $9000 balance and a 28% interest rate, which happens with just a couple late payments, and you pay the minimum payments only. Someone that only pays the minimum payments will take 1984 months to pay that $9000 balance off. I am not sure about you but I am not going to live 165 years to pay off my credit card debt.
Obviously it wouldn’t take you that long to pay it off because your estate would cover it when you died but it speaks to the point of my article. How would you plan to retire comfortably, and certainly not early, if you have this debt as well as other debt hanging over your head?
What many people do not see is that the money you save by not forking it over to the billion dollar banks, that give you the credit cards, can be used much more wisely for you. At my worst I was paying $400 in interest on credit cards. Once I finally paid off my credit cards and stopped using them I found I was easily able to pay cash for the things I would typically put on credit cards. Not only that, I found when I was taking money out of my bank account I was much more careful on what the money was being spent on in the first place.
I decided at age 27 that I wanted to retire comfortably at age 50 and spend my free time with my kids (that I did not have yet) and grandkids. It was worth it to me to sacrifice at a younger age than it would be to deal with my mistakes at age 70. Who really wants to be bagging groceries, at the age of 70, for some high school kids running the register? I know I don’t. Clearly, it could happen anyway because of illness or some other circumstance that wipes out my retirement savings but I have no control over those things. I do have control over stupidity though and I wanted to stop it at an early age.
What I am hoping you will take away from this article is how bad credit cards are for you. Credit card companies make billions in profit each year and it is for a reason. Many people feel the insurance companies are the same as credit card companies in that they like to “screw” people. The difference is, with an insurance company you are at least getting something back for all the money you give them, if you buy the right products of course.
Insurance companies are rich because they take the money you give them in premiums and invest it to make their money. In many cases insurance companies pay out more money on claims for auto and home than they actually take in for premiums. It is hit or miss if they make a profit on “earned premiums”. (Sorry for the insurance jargon.)
You get no benefit from a credit card company accept for the ability to spend even more money you don’t have. Credit cards should be use for emergency purposes only and if you adopt that outlook you will most likely be standing next to me on the golf course in 20 years.