In a challenging economic climate, financial expert Suze Orman offers a pragmatic approach to managing credit card debt that emphasizes incremental progress rather than drastic cutbacks. She advises individuals to focus on gradually increasing their monthly payments instead of eliminating all non-essential spending. This method promises to help people make tangible progress on their debt while maintaining a sustainable lifestyle.
Orman's strategy centers on the concept of building momentum through consistent, incremental increases in payments. By paying more each month than in the past, debtors can gradually reduce their balances without feeling overwhelmed. This approach is particularly beneficial for those who find themselves struggling under the weight of substantial debt.
"Orman wrote in a recent LinkedIn post. 'My challenge is for you to pay more this month than you did last month. Then do it again next month. And again.'"
Even small changes, such as increasing payments from $20 to $50, can generate significant momentum. This philosophy underscores the idea that progress, no matter how small, is better than none.
"Even going from $20 to $50 creates really good momentum." – he
While avoiding discretionary purchases on credit cards is advisable due to high interest rates, Orman cautions against cutting out all non-essential spending. Instead, she proposes a balanced approach that allows for occasional affordable pleasures, which can help maintain motivation over time.
"It's just unnecessarily strict and unrealistic and won't work in the long run." – Matt Schulz
An often-overlooked aspect of financial health is the importance of an emergency fund. Financial planners typically recommend saving enough to cover three to six months' worth of living expenses. Even a modest savings cushion can prevent individuals from falling back into debt when unexpected expenses arise.
"If you have even a little bit of savings when you finally get that card debt down to $0, it will make you less likely to get right back into debt," – Matt Schulz
Setting aside cash for an emergency fund not only provides peace of mind but also reinforces good financial habits. It ensures that when emergencies occur, individuals are less likely to resort to credit cards and accumulate more debt.
Despite the emphasis on consistent debt payments, Orman suggests that creating room for small indulgences can aid in long-term debt management. By focusing on incremental increases in monthly payments rather than dramatic lifestyle changes, individuals can establish sustainable financial practices.