You’re low on funds and you need something: a car, a place to live, an education, just something to keep you going.
You take out loans. You get whatever you need with the loan, but you’re still struggling to make ends meet. Now you’re unable to pay for what you had before and the debt that you’ve taken on.
You take out a credit card to push those payments off for a month. Now you’re swimming in more debt. Sound familiar?
This is the Debt Cycle. It’s vicious and unforgiving. We’ll help you get out of it.
College. A time of excitement, exploration, and discovery.
Yet it comes at a cost. Today, over 43.2 million student borrowers are in debt. It’s reported that the total student loan debt in the US is reaching two trillion dollars.
That’s ludicrous. It sets vulnerable students on a path to continually owing money, long into their adult lives.
Credit cards are a tremendous asset if used properly. However, they have high fees if they aren’t paid off in time. Yet it’s around college that most students are offered their first credit cards.
It’s enticing. Who wants to carry lots of cash around on them when they’re heading to class, going out for meals, or attending parties?
Unfortunately, there’s no tutorial class on how to use a credit card responsibly. If you see that maximum credit rating of $1,000, $2,000, or $5,000, it might seem like that’s a challenge to aspire to.
It’s not; and once the monthly statement arrives, if you can’t pay, you might find yourself with APR fees as high as 20 or 30% on top of what you purchased.
When these fees begin to compound month over month, it becomes overwhelming. Hence, it’s always better to know and not make the common credit card mistakes to avoid getting into further debt.
Debt causes people stress. And to prevent that insane debt from compiling, many turn towards small loans or, worse yet, other credit cards. They can pay off the high rates with cards or loans that have slightly better rates.
Suddenly your income is going towards paying off a revolving door of debts and not going towards anything meaningful in your life. It can feel hopeless at times, but it can be broken.
It starts with intentional actions on your part. The first is making meaningful changes to your spending habits. This doesn’t mean you can’t get your cup of coffee with a friend once a week.
It does mean you might want to stop buying a cup of joe every single day, however. Start with small changes like this to reduce the short-term debt cycle. Penny-pinching, while difficult, will add up over time.
By creating a plan that targets your debts based on priority, you’ll see where your money needs to go each month and how much you can save.
Start by getting out of the loans that are accruing the most interest. Even if your student loans are $40,000 and your credit card debt is $5,000, the APR on the credit card is going to skyrocket.
If you’re already swirling around in the debt cycle it can feel like a steep, mountain-like climb. The key is perseverance.
If you have spending struggles, cut your cards and pay for things only with cash. If your loans come from elsewhere, consider refinancing for lower rates.
There are ways out of the debt cycle. If you’d like more help with finances, budgeting, and more, check out the related blog articles.