Some people have dreams of traveling to exotic locations but are hampered by credit card debt at high-interest rates. For those who love to travel, there are some who just would like to afford two weeks of travel each year. Others would like to go on the road for a while, maybe leaving everything behind. How can you get there if you are swimming in a sea of debt? Here at Interstate Associates, we are in the business of advising our customers on how to overcome crippling debt and pursue their dreams.
Evaluate Your Situation
The first step in getting out of credit card debt issues is to carefully evaluate your monthly budget as well as each credit card’s principal remaining and interest rate. In your monthly budget, don’t forget to estimate yearly expenses, such as car maintenance, registration, and insurance.
Where Can You Lower Expenses?
Would you rather drink a Starbucks every day, or would you rather take a great trip or two each year? Maybe some would prefer the former, but you are reading this article because you want the latter. The same is true of dinners out. Can you cut the cable TV? This author did in 2003 and has never looked back. If you are cramped and crippled from pursuing your dreams by debt, it is best to first see how you can reduce expenses that are unnecessary.
What Can You Throw at the Debt?
How about that tax return? If you used it to pay down your highest interest credit card, you would be saving yourself a bunch of money. Are there things you can sell on Craigslist or eBay that you aren’t using?
If you are planning on traveling long term, will you be going somewhere with a great transit system? Maybe you could consider selling your car and using it to pay off debt. Those of us who are full-time RVing can substantially reduce or eliminate the cost of staying somewhere if we know where to stay. Full-time RVers may decide to sell their homes or stop renting apartments while they are on the road. All of the money saved by digital nomads who are road warriors can go to paying down debt.
There is one big caveat here: Don’t head out on a long-term travel excursion if your finances are shaky. Get debt cleared up first. The scariest thing in the world is to be trapped somewhere in a financial emergency with no funds and maxed-out credit.
How Can You Reduce High-Interest Payments?
There are two great ways to reduce high-interest credit card debt:
Debt Consolidation: Nerdwallet suggests you can take out a personal loan that will wipe out your credit card debt and reduce your interest. This will allow you to make one payment at a lower interest rate, so you can pay off the crippling debt more quickly.
Zero-Interest, Balance Transfer Credit Card: If your credit is not good enough to qualify for a debt consolidation loan, Nerdwallet suggests you will likely be able to get a balance transfer credit card that has a zero-interest period of 12 to 18 months. During that window of time, you will need to make as large of payment as you can each month, taking advantage of your “interest vacation” to pay the credit card off. Beware the interest rate after the honeymoon period is over.
How to Pay the Cards Off
Investopedia suggests that if you want to get out of the debt most quickly, make the minimum payment on every card but the highest-interest card. Throw as much money as that card as you can. When that card is paid off, begin to pay down the card with the second-highest rate. This will get you out of debt and on that vacation the quickest and with the least money outlay.
Make an Emergency Fund
The Balance suggests creating an emergency fund. You really need an emergency fund for daily life in your area and funds that will cover you in the event of an emergency in your desired travel location. Take the time to figure out what can go wrong and begin to amass that amount of money. Unless you have parents or friends that will definitely be in the place and desire to bail you out, that is the only safe course of action.
Control Impulse Spending
Do whatever it takes to eliminate impulse spending that keeps you from your travel goals.
Impulse spending restraints include:
- Leaving credit cards at home when shopping – just carry cash.
- Wait 24 hours before making a purchase that does not support your budget and travel goals
- Don’t spend in order to keep up with the others. Who cares?
- It may be a good idea to avoid Amazon and other spending triggers unless you have a clearly delineated need.
Interstate Associates has advisors who can help you with your unique credit situation, so you can achieve your goals of credit card debt reduction and travel