Hello, I'm your host, Mr. Chuck, a retired accountant turn truck driver, I reduce my debt in a relatively short period of time. debt reduction to achieve financial freedom takes commitment, confidence determination. paying off credit card debt, by now that Christmas spending is showing up on your credit card statements at least one month or perhaps two statements, now's the time to start planning to avoid the same debt problems next year. How to quit using credit cards to pay for Christmas. More than half their shoppers are going into debt this holiday season the study finds and I got links in my show notes to two articles. This one is from cnbc.com. And according to their studies, Americans are spending less than holiday season but still more than they can afford. The average consumer plans to spend around $1,000 on themselves and their families, but just pretty much the same as last year. Roughly speaking, and for the first time about 45% of shoppers plan to use, buy now pay later for their holiday shopping to spread out their expenses. According to the report, which pulled more than 2000 adults. The consumer over the last 12 months had became more compositive and the Buy Now pay later products are the results of being locked up for too long and wanting more instant gratification. However, installment buying can encourage consumers to spend more than they can afford. nearly 40% of shoppers say that they could spend less F Buy now pay later wasn't an option. And to make things even matter, 56% of shoppers have made a purchase with Buy now pay later they can't afford to pay off. That's not a good thing. Roughly 43% said if a big purchase had a buy now pay later option, they will be more likely to buy it. So our spending for 50% of the shoppers is continuing to go out of control, people are spending more than they can afford to pay off. And they're gonna live to regret that if you're struggling with debt, and Christmas is the cause of it, and then you need to listen to how solve the problem so it doesn't happen again in the future. And my second article, and my show notes is better money habits dot Bank of america.com. Four strategies to pay off credit card debt faster. And some of these I agree with some of them is about what I would recommend some I don't quite recommend to tackle credit card debt head on, it helps to first develop a plan and stick to it. And I'm going to be giving you a plan a little bit later on. Focus on paying off high interest rate cards first, or cards with the smallest balances. And I'm going to help you determine which ones to pay off first and the order you should be paying them down. And then here's a fact when you pay more than a monthly minimum, you pay less in interest overall. But you don't want to pay more than the minimum on all your debt all the time because you'll never make it you'll never get anything paid off. So the first strategy is to target one debt at a time, which is when you're focused on one debt at a time you got to either or you got to focus on the high interest debt. Or try the snowball method which you pay off the lowest balance first. so high that highest interest or the lowest balance is the order you would pay them off. Pay more than a minimum and I'm going to explain why you don't want to do that all the time. And that's part of my debt reduction plan. consolidate debt. Well, you can consolidate debt if you have bad credit, because consolidating debt, meaning you're gonna borrow more money to pay off debt, so you're going to use debt to pay off debt or not. That in a nutshell is not reducing the debt. But it may be reducing the rate of interest you have to pay if you have good credit. And then you're got transfer balances, you can take advantage of a low balance transfer rate to move high interest rate card to a, a offer where they give you a 12 or 18 months 0% interest and they charge you a transfer fee from normally 3%. But it could range between three to 5%. Tap in your home equity. And I do not agree with that. You don't want to pay off your unsecured debt with secured debt. Because if things get tougher and you can't make a house payment, then you lose the place you live. So if you owe on credit cards, you don't pay credit cards, it just hurt your credit rating. Review your spending a course review pay with cash is much used financial windfalls, such as bonuses that work your tax return refunds and other things you might come into extra lump sum of money. So that's the two articles. Now let's get down to the nitty gritty. So the first thing you need to do, what is our goal here, our goal is to not create that every Christmas. And for my listeners that may be have a debt reduction plan in place. You're kinda you know what I'm going to say? We we have a idea of what's going on. But so how are you gonna do this debt reduction plan. So your debt reduction plan is, the first thing is you got to quit creating new debt, quit using your credit cards, quit borrowing more money, that's number one. Number two, is make the minimum payment on all your debt, all your credit cards, all your personal loans, make the minimum payment. Number three, start an emergency fund. If you don't not have an emergency fund, you need to start an emergency fund. So what is an emergency fund is simply a savings account at your local bank. peripherally we're you have your checking account, if you do have a savings account, but or maybe have $50 in there, or a couple $100 in there and you never use it. Now's the time to start using it. If you don't have a savings account, you need to go to the bank, or your have your checking account and set up a savings account. There'll be a minimum amount you have to deposit probably around $50. It could be last but like last time I remembered it was $50. Put the$50 in there. Why? Because it's going to become your emergency fund. So why do you need an emergency fund, but you need an emergency fund so that you can quit paying using debt. So if you're driving down the road and you blow a tire, and you have to buy a couple tires, because you should buy him a pairs, you don't have the money to pay for it, then what are you going to do, you got to put it on our credit card. So you're creating more debt. If you had an emergency fund with enough money in there to buy those tires, you could maybe use use the money ie your checking account to pay for the tires. And then you could transfer the money out of the savings account to cover that purchase. So what did you do? You quit creating new debt, and you was able to pay for an emergency that was more than four or $500. And you didn't have to create new debt. So why you want to do that, so that you can continue making progress on paying off your credit cards. So you can continue making progress on paying off all your debt, whatever it may be. So how much do you really need in an emergency fund should start out with a minimum of $500. And then over time building it up to 1000. So for my listeners that's been listening for maybe the last six months, maybe you already have an emergency fund. Maybe you already have the$1,000 in there and you've been doing the step by step that I've taught you over the last six months but for the New people who are struggling with Christmas debt, or maybe you been making progress and then Christmas killed your plan. So how are we going to fix this problem? Well, that what you need to do is to increase your emergency fund to include your Christmas spending, the average family spends $1,000. So if you have $1,000, in your emergency fund, between now and mid time you start shopping November, you need to make sure that your emergency fund has $2,000 in there, then if you spend less than that $1,000 On Christmas, say you only spend $800. And now your emergency funds gonna be$200 bigger, and you can build it up some more. And you can keep doing that. So that maybe your emergency fund was 1000, then we built it up to 2000. A use part of that for Christmas, you did not create new debt, and you're staying on track with your credit card payments and pay downs. That works. But you have to be dedicated, and you have to stay focus, you have to be aware of your spending all the time. And in order to do all that you would need a budget. I'm not going to get into a budget, but you need a budget. And I've been talking about in the last couple episodes, you need to track all your spending through your checking account and all your credit card, you need to categorize it, then you need to do reports, then you need to do a budget based on how much you spend in the previous month, and then try to stick to it in the current month. Consistency is the name of the game here. If you're consistent from month to month, the month and know what's going on, you'll know how much money you have. He know how much money you're gonna need. And you're going to know how much money he'll be able to save. And you'll be gradually increasing that emergency fund. And then once you reach the emergency fund of 2000. So we have 1000 in there for our emergency, we have another$1,000 in there for a Christmas spending. Now anything in excess of that, that you can build up, say you build it up to $4,000. Do you have the extra $2,000 That you're gonna apply to your debt? So how are you going to pay off that debt, the first thing want to do is determine if you're just getting started, which that has the smallest balance. And generally speaking, I'm referring to credit cards, that maybe you have a personal loan that has a smaller balance and then the credit cards, maybe you need to focus on that personal loan first, maybe you need to focus on that payday loan and get rid of those payday loan because you're paying a very high rate of interest, the less interest you pay, the more principal you got to pay. So that's what you want to do first, pay off the smallest balance first. Then once that's paid off, and you accumulate more money in your emergency fund, you have maybe another 4000 5000 in there, you need a minimum of 2000 because 1000 for your emergency fund 1000 for the Christmas spending for the Fall next coming up year, you're gonna apply it to the loan or credit card that's charging you the highest rate of interest. Why? Because the less interest you pay, the more principal you can pay. So the sooner you get the highest rate of interest paid off, the more money you're gonna have. Then you just kind of be a domino effect and this can go faster, faster and faster. Now that if the first item you paid off was a credit card. That balance transfer. This is why you want to pay off the lowest balance credit card first. Once you get to that point if you have other loans with lower balances, do those first once you get to the credit cards, pay off the credit card with the lowest balance and this is the reason you want to do it. Because you do not cancel that card. You keep that card open. And maybe every couple months you do a small purchase on it. 10 $15 And then you pay it off right away, so you got a zero balance, they will send you an offer, that you can transfer a balance to them from another credit card, pay a three to 5% rate and a percentage of the amount that you transferred. So if it's a 3% rate to transfer the balance and you transfer$1,000 3% of $1,000 or $30, that$30 is going to be recouped, because you're going to pay zero interest for 12 to 18 months. And that zero interest that you pay, and instead of paying 21% rate of interest, you're going to recoup that $30, you spent to transfer the balance, and maybe even double or triple what you paid to transfer the balance, only transfer the balance, the total amount that you can afford to make a regular monthly payment and have a paid off before they start charging in interest. So if it's an 18 month, zero rate of interest, you divide whatever you're transferred by 18 months in, you pay the first month, that plus the fee. And then you pay whatever the amount that you figure it out to be. So that you get paid off. Do you want to pay that off early, you're not paying interest on there, it's not costing you anything, perhaps you just need to stay focus on make sure you don't miss a payment, pay it off in 18 months, and focus on reducing that credit card with a higher rate of interest. I know it seems complicated, it's not that complicated. You don't really want to use your equity home, have line of credit on your home because your home is secured debt. Meaning that if you default on your mortgage on that loan, they can sell your house from under you take their money, give you the access, pay off whoever else you go and give you the access. But where are you gonna live, you have no place to live. So if it's a credit card debt, it's unsecured if you default on that credit card, only thing they're gonna do is maybe debt collectors are gonna hound you, they may take you to small claims court saying that you owe him the money. But if you don't have the money, you can't pay him, they're gonna go away, you're not gonna lose your home. They might file a lien against your home, but I doubt it. They hardly ever do that, as far as I know. But that is a thing. But it's better than losing your home and having no place to live. Same thing with a car. A car is the asset for that loan. So don't use your home line of credit to buy an automobile. Because if you wrecked that car, he still had to pay for it. Even though insurance might pay you the value of the car, it may not be enough to pay off the loan that you borrowed. So then you end up getting stuck with the unpaid balance portion is still on your home. And even if you get all that and you apply it to that mortgage, your mortgage payment, don't go down until you refinance, it doesn't go away. So keep your mortgage monthly payment as small as possible. Because the only way you get your mortgage payment to go down is by refinancing or getting a new loan or completely paying it off of the back to one moment. It was my final thoughts. For those of you who listen to this podcast on the app, please figure out if you can rate and review. If you do, I really appreciate it for you doing so. If you know somebody who may benefit from listening to this podcast, please refer them to reduce debt increase wealth.com Is my webpage where you can find all my episodes, or you can find it on all the apps that have podcasts. Stay in our debt from buying Christmas presents is not that difficult to do. If you have a debt reduction plan that is going to help you Solve this problem. So what is a debt reduction plan? Well, one, quit creating new debt. To make the minimum payment on all the debt, you have three, set up an emergency fund a savings account, have at least a minimum of $1,000 for an emergency. And then on top of that, say the amount you're going to spend for Christmas and the upcoming next year, then once you have those two amounts saved up in your savings account, then you build it up even higher. Why because as long as it's in your savings account, it remains to be your emergency fund. So if you have three or 4000 in there, that gives you extra funds for an emergency. Then once you have couple, two or 3000 in excess of your minimum emergency, plus your Christmas spending, then you apply that amount of money as a lump payment to the credit card with the lowest balance first. And then second, when you do it the next time, the credit cards with the highest rate of interest. And you keep doing that over and over and over until you have all your credit card debt paid off. It's gonna be slow to get started. That as you go is gonna pick up and speed. I'm not even gonna tell you, you need to make more money, increase your earnings is gonna help also. And the other thing that's gonna help is setting up a budget. Watch your spending, tried to reduce your spending and try to get debt credit card debt paid off as soon as you can. Because once you do that your emergency fund can grow up to three months worth of living expenses, and then you'll have some financial stability, and you'll be much better off for doing it. And you'll be happy you did so