The golden rule of minimizing debt is this: “If you don’t have the cash to pay for it, don’t buy it.”
However, that rule is not always realistic. The majority of adults in the United States are in some form of debt. Whether it’s in the form of a mortgage, car payments, student loans, or credit cards, you’re most likely still in the process of paying for something you once purchased on credit. There’s nothing necessarily wrong with that. In fact, it’s not harmful to your credit score to carry around debt—it’s only harmful if you make late payments. So stop focusing on the virtually unattainable goal of “zero debt” and aim for responsible debt management, instead.
Thankfully, managing debt responsibly isn’t all that complicated. If you pay attention to your credit card statements, for instance, you can take note of any recurring charges for products or services that you can afford to cut. This will keep you from racking up debt even further. You should also make sure to pay off your credit cards in the order of interest rates, focusing on making extra payments on the card with the highest interest rate so that card can be paid off first. And once a card is paid off, keep it open. Canceling your card could actually hurt your FICO credit score.
Of course, if you’re interested in more advanced options for minimizing and managing your mortgage and other types of loan payments, don’t hesitate to contact Taxation Solutions, Inc. We’re here to help Atlanta-area residents and businesses find solutions to all of their tax and finance problems.