Too Much Credit Card Debt
If you have fallen behind on your credit card payments and cannot make the minimum payments, this is a good time to call your credit card issuer and see if you can find a solution, especially if your job has already been affected by COVID-19. Various , such as payment deferrals for credit cards and other accounts. If you have good credit, you might even be able to consolidate your credit card debts into a lower-interest loan.
If you can explain your situation to your creditors, they might be able to work with you to figure out a new payment plan, waive some fees or renegotiate your debt. It’s best to be proactive and call your credit card issuer as soon as you know that you’re going to have trouble making your next payment.
Especially during a time of crisis, when millions of people are suddenly unemployed and struggling, your credit card company might be more likely than usual to help you figure out a plan to manage your payments and protect your credit score.
After the Crisis Passes: Stop Living Paycheck to Paycheck
There’s still so much uncertainty around the COVID-19 crisis; we don’t know when it will be over or what the “new normal” will look like. We don’t know if the economy will go back to business as usual and recover quickly, or if social distancing and job-disrupting public health measures will need to continue for several months. We also need to consider the possibility that this will all happen again in the fall or winter of 2020-2021.
But no matter what happens next: If you are currently not satisfied with your financial life, if this crisis has come as a financial shock, if you’re tired of living paycheck to paycheck, use this crisis as an opportunity to improve your financial foundation for the future.
Here are a few possible ideas to help you envision a better financial future without credit card debt.
- Lower your housing costs. Many Americans are rethinking their lives and reconsidering the city where they live. If you live in a big, expensive, stressful city, or a neighborhood that you can no longer afford, this crisis might be a chance to start thinking about relocating to a less expensive area. You might even want to move to a lower-cost part of the country. What if you could significantly reduce your cost of living by moving to a cheaper city or a smaller town with a more relaxed pace of life? Could you get a roommate, or move in with family or friends? There’s nothing wrong with communal living to help you get your financial situation back where you want it to be. This is an especially attractive option if you work from home.
- Eliminate big-ticket purchases. Are there expensive items you’ve been living with that are dragging down your finances? Could you get by with a less expensive car with a lower monthly payment? Can you go for a year or two without an expensive vacation? You can save a lot of money by making just a few big decisions.
- Squeeze savings out of your monthly budget. Take a rigorous look at your monthly budget. Track your spending for a month and figure out where your money is really going. Could you make some cuts on areas like a gym membership that you don’t use, monthly subscriptions to streaming TV channels that you don’t watch, and a few restaurant meals per week?
What if you could identify $200 of savings from your monthly budget, save $400 a month by getting a roommate or moving in with loved ones, save $100 a month with a cheaper car payment and save $2,000 by not taking your next vacation? That would add up to $10,400 of cash in the bank after one year. Is having all of those little conveniences and indulgences worth it to you? Or would you rather have cash in the bank?
Whatever happens next with the economy, eliminating credit card debt and creating a life where you’re not living paycheck to paycheck is an excellent choice. Even if you have to make some tough decisions and sacrifices in the short term, if you can figure out how to live without credit card debt, you will emerge from this crisis with a stronger financial foundation for the future.