Without most people knowing it, having a thousand dollars of credit card debt means having to pay the average credit card interest of 24% per year.
Now, if you owe $1,000, you will have to pay $240 of interest at the end of the year.
You may find yourself in a bind if you are heavily in debt. Then somewhere, you heard that you could make money from stock investing.
So you wonder, should you invest so that you can make enough money to repay all your debts?
Well we are here to tell you to stop!
You can only do so unless you go bankrupt. But the main thing is you should never invest when you are in debt.
In this episode of the #AskDrWealth series, we will explore into this misconception that often victimises people with credit card debt to invest. Shedding some light into that, we will break down the reasons as to why you shouldn’t. Instead, we offer you four things you can do.
What Should You Do Instead When You Are In Debt?
#1 Cut Your Expenses
Probably one of the most logical things you can do instead of investing when you find yourself in credit card debt is to cut your expenses.
Most of those who got themselves out of this dilemma can testify how changing up their lifestyle has greatly transformed their financial life for the better.
Spending more than you actually earn is a bad symptom. So the first thing you should do is to cut out some of the unnecessary expenses that you might be making.
Of course we have to acknowledge how this can be emotionally and mentally difficult for some. That is why you need to sit yourself down and prepare yourself for some reality check.
You don’t have to beat yourself up either. Just take things in stride as long as you are moving forward.
Some people gave up their car because they realized they don’t need it while some terminated their cable TV simply because they found that they don’t even watch them any more.
There are actually many ways that you can go about it and that is enough reason why you can cut down on your expenses too.
#2 Review Your Insurance
The next thing you can do may take some backtracking on your part to look for those insurance services that you applied for in the past. You may find that you overcommitted yourself to insurance policy.
Without knowing it, you may realize how much of your salary is actually reduced amidst paying all these insurance premiums each month. On top of it, you may even find how you need don’t some of them after all.
Knowing all these things, you should consider terminating some of these extra protections that you don’t necessarily need. This could free up some precious cash flow, doing good to your pockets and lightening your debt.
#3 Clear Your Debts
Once you’ve gathered enough of your money, the next thing you should be doing is clearing your debts. Don’t invest yet. You should remove your debts first and pay up your responsibilities before moving on to that venture.
The truth is this:
“Debt is a drag to your financial life.”
Therefore, in order to move forward, you should get rid of it as soon as possible.
To go about it, we advice that you should repay the debt with the highest interest first. Then you can proceed to the next one and soon, you’ll find yourself clearing them out.
#4 Increase Your Income
Clearing up your debt may put your life on hold. So to counter that, what you need is an increase in your income.
We advice that you go find some extra sources of income to provide for the other aspects of your life. You can’t always be stuck in clearing your debt. You can also move forward.
There are actually a lot of ways that you can increase your income, especially nowadays where so many opportunities are flowing.
Just go and find something that can increase your income in the meantime.
Lastly, it helps to remember that money is not everything. But without money, you can only think about it every day.
So get your finances back up and we can talk about investing some other time.
See you in the next!