Yahoo Finance Debt Is No. 1 Way To Measure Financial Security — 3 Ways To Control It and Boost Wealth
Financial security may look different to everyone, but a recent poll shows that most people measure it based on one key factor. According to a CNBC|SurveyMonkey study, 59% of respondents said that financial security would mean having no outstanding debts.
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Other key indicators include owning your own home, having a high level of savings, and having a well-paying job and secure career path, based on the responses of over 4,000 adults across the globe.
The survey also showed that 65% of respondents still lived paycheck to paycheck, making it harder to tackle debt and focus on savings. In fact, 72% of people said they had debt, and over 40% indicated they had credit card debt, which can be particularly challenging to get rid of.
Luckily, there are several things you can do to help reduce your debt and get on track for a more solid financial future. Here are three ways you can get your debt under control and boost your wealth.
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Use Debit Cards Instead of Credit Cards
Getting into credit card debt can be a vicious cycle. If you aren’t paying off your card each month, you are incurring huge amounts of interest on your balance. Making only the minimum payment may mean that you spend years paying off a balance of under $5,000.
If you want a clearer picture of the amount of interest you will pay over the course of your credit card debt and just how long it will take to pay it off, you can use a credit card payoff calculator. Many companies also offer debt relief services if you find yourself struggling with an insurmountable amount of debt.
When it comes to credit cards, Jordan Patrick, CFP and senior financial advisor at Commas, explained, “While credit cards can be valuable tools for building credit and earning rewards, they often lead to higher spending. People who use debit cards tend to do a better job of tracking spending to ensure they don’t exceed their bank account balance. This approach can lead to significant savings that outweigh the rewards earned from using credit cards.”
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Understand Why You Have Debt
It can be difficult to get out of debt if you don’t understand how or why you got into it in the first place.
Patrick advised, “Take time to reflect on the reasons behind your debt. List out your debts, think about where they came from, ask yourself if anything could have been done differently, and game-plan for the future. If you have credit card debt from an expensive vacation, you could create a plan to manage future temptations to overspend. For debt from surprise expenses, focus on building your emergency fund. This exercise isn’t to create shame but is meant to empower you in the future.”
Track Your Spending
Building a more secure financial future often begins with knowing what you are spending.
“Knowing where your money goes is the first step in understanding your financial habits,” explained Patrick. “Track your spending for several months, review it regularly, and identify patterns and problem areas to address.”
He continued, “Through this exercise, you may find that you are overspending on categories that aren’t adding value to your life. Use this as an opportunity to identify expenses that could be reduced, which will help prevent future debt and free up cash to make additional payments on existing debt.”
Final Considerations
Financial literacy can go a long way in helping you to get your debt under control. Understanding how to budget, save and invest from an early age can help you achieve the financial security you want throughout your lifetime.
However, the path to a brighter (and more secure) financial future isn’t necessarily debt-free. Jordan explained, “Not all debt is bad — some can help you make progress in life while other debts may restrict you. Focus on minimizing your debt to a level where you can make progress toward future financial goals and have some flexibility to enjoy the present.”
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This article originally appeared on GOBankingRates.com: Debt Is No. 1 Way To Measure Financial Security — 3 Ways To Control It and Boost Wealth
