Let's talk about credit card debt. I know, I know, your favorite topic. Calm down, calm down. No horseplay.
I said calm down, motherfucker.
Here's the story as I imagine it: you wanted a guitar or some other such flashy, expensive, and heretofore-unused item. Since you're poor as hell, you paid for it with a credit card. You knew it was a bad idea, but you did it anyway.
Then, you wanted a nice amp to go with it. Then, a whole wardrobe of brand new clothes that had been made to look as if they were not brand new. Perhaps then a series of other such uncool, ill-advised purchases. A collectible Darth Vader Pez dispenser?
Now, you have credit card debt in the thousands of dollars.
ADA, pay that shit off now. Paying that off is more important than your emergency stash, more important than your retirement, and more important than any other debt you're paying off.
See, credit cards grow at rates like 13.45%. If you have bad credit -- you do -- the rates are closer to 18.99%. That debt grows way too fast to keep a lid on it. With your retirement and your nest egg you couldn't make money that fast except in the rarest of circumstances. You could never, ever count on making money that fast for a sustained period of time.
I'm going to sound like a hypocrite here: skip building your nest egg and saving for retirement until you've paid off that credit card debt. Think about it like this:
- Once you've paid off your credit card debt, your credit limit will still be the same. In case of emergency, you'll be able to put yourself back into awful credit card debt. For this reason, paying off credit card debt is more important than contributing to your nest egg.
- Credit card debt will grow much, much more quickly than your retirement account. What good is growing your retirement account if you're growing your debt even faster? For this reason, paying off credit card debt is more important than contributing to your nest egg.
Keep the credit card. You might need it for emergencies. And if you're really disciplined, you can use the card to your advantage.
Pro-tips!: Get a card that offers rewards. Make most of your purchases with the card and pay them off immediately. Only buy things with the credit card if you can pay for them with cash; after you've made your purchases, go home and pay off the debt immediately. You'll earn the rewards -- cash back, airline miles, whatever -- without ever having to pay interest. It's sort of like free money, and it's good for your credit history.
So what are you going to do first, ADA? That's right. Pay off credit card debt.
I said calm down, motherfucker!