“Credit cards ruined my life.”
“I guess they’re fine for some,” says 55-year-old Barbara Statin. “But I was using them all wrong.”
Barbara lives with her husband Steve in a small ranch-style home in Crab Orchard, Kentucky. But Barbara spent much of her thirties in Louisville, working for a small press publishing company.
“I wasn’t making a lot of money,” says Barbara. “But I fell in with this group of girls — nice folks but they were big spenders. Fancy dinners. Expensive clothes. Cocktail hour after cocktail hour.
“It was exhausting. And expensive. But I loved spending time with them and I didn’t want to give that up.
“So I used credit cards to try and keep up. And I racked up charges I couldn’t possibly afford to pay off. I’d be lying if I said it wasn’t fun… for a while. But then it all came crashing down.”
Over the course of just three short years, Barbara managed to rack up over $45,000 in credit card debt.
“It ruined me,” says Barbara. “Ruined me. I managed to negotiate a repayment plan. But it wasn’t kind. Had to get a job back in my home town and move in with my parents. Every dime I made in those days went to repaying those cards.”
Barbara says she got her life “back on track” eventually. But she always wondered what her life would have been like without this major upset.
Obviously, debt can be dangerous when used irresponsibly. But “responsible debt” can be just as dangerous in the right circumstances.
According to an American household debt study, the average American household owes about $137,000 in debt.
That’s all well and good when the economy is stable and you’re earning a steady wage.
But if there’s a market crash and you find yourself in financial straits, the banks will be more than happy to take your house and car as payment.
During the housing crisis, money lenders foreclosed on the homes of 10 million families across the U.S — one of the largest displacements of Americans in modern history.
And that’s the catch. I’ve seen folks on survivalist blogs dismiss their debt, assured that it will be wiped out when the grid goes down… or the economy as we know it is destroyed.
But disaster comes in many shapes and sizes — economic, political, natural and personal. And when it happens to you, you’ll find the folks you owe money to be less than understanding.
Prioritizing Your Loans
Some financial advisers suggest paying off your debts highest to lowest, while others swear by the opposite strategy.
But these folks are operating on a common misconception.
It doesn’t matter if your loan is “large” or small.”
Instead we look to the interest rate on those loans.
Your interest rate determines how quickly your debt will grow — the higher it is, the more money you’re going to owe every month. So, by paying off the loans with the highest interest rates first, you minimize the amount of interest you’ll pay (and the amount of money you’ll pay overall).
Or as bestselling financial author James Rickards put it: “Paying off high-interest debt is economically identical to investing in a high-interest bond. It’s compounding in reverse. When you pay off high-interest debt, the monthly debt burden goes down faster than paying off low-interest debt because you save the interest also.”
With that in mind…
Step 1: List your debts in order of largest to smallest interest rates.
Step 2: Start by setting aside the funds to make the minimum monthly payment on all your loans.
Step 3: Put extra funds into the debt with the highest interest rate. The only way to eradicate your loans quickly is to commit to paying more than the minimum payments every month.
Step 4: Repeat this method every month until the loan with the highest rate is paid off, after which, move on to the loan with the next highest rate.
Getting out of debt was one of the best actions my wife and I took financially.
Don’t get caught with heaps of debt during the next crisis.
Get out now.
All the best,
Editor, Money & Crisis
P.S. Governments around the world are secretly preparing an alternative strategy for the next big crisis: a lockdown.
The global elite has already started making their own preparations, including hoarding cash and hard assets.
It will be the average investor who suffers most — unless you act now.
New York Times bestselling author Jim Rickards pulls back the curtain on this global collusion in his new book The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis.
And for a limited time, Jim is giving away free copies to readers of Money & Crisis.
In this groundbreaking tell-all, Jim reveals the powerful strategies you can use to protect your money and your family from the coming crisis.
In light of recent events, there isn’t a better time than now to take Jim up on his offer.