RULE NUMBER ONE PAY OFF YOUR CREDIT CARDS EVERY MONTH
Without question the number one most important thing you can do to start on the road to early
retirement is to GET RID OF YOUR CREDIT CARD DEBT. I will illustrate (dramtically) below
why this is the first and most important step that you can take.
The below illustrations assumes that you owe $5000.00 in credit card debt
and that your interest rate is 18%. Many cards charge higher rates than this!
As an example, if you were to pay $1000.00 per month on this
credit card debt
it would take you 6 months to pay off the balance and you would pay about $237.00 in interest.
Not too bad a deal, but it can get worse.
Lets say you pay
only $500.00 per month on this debt.
In this case it would take you 11 months to pay off the balance
and you would pay about $458.00 in interest.
Still not too bad, but that $458.00 could be put to better use.
Now, let's say you can only come up with $250.00 per month.
Still not a disaster as it would take you 24 months to pay off the balance
and you would pay $989.00 in interest essentially $1000.00 down the drain!
But watch out here is the worst scenario in which you only
pay the minimum each month.
Most cards take your balance and divide it by 49 or 50 to come up with this number.
In this example your minimum payment would be $100.00 per month.
If you were to pay only the minimum you would pay an astounding $13,931.00 in interest,
and you would be paying off this credit card for the next 46 years (553 months)!!
AND, remember this- While you are paying this off you cannot
make any more charges to this card.
Clearly, if you are going to use a credit card you have to make more than the minimum payment,
and hopefully you will pay the whole balance each month.
So, here is rule number one in the playbook to early retirement
PAY OFF YOUR CREDIT CARDS EVERY MONTH.