One of the things I haven’t touched upon in a while here is thrift and credit card debt.
As the year comes to a close I thought I will do a post on credit card debt and interest on credit cards because I think I’m fairly close to a year in which I pay zero credit card interest.
Last year I paid a nominal amount because I forgot one payment, and the year before last I paid a small amount for the same reason as well.
Paying no interest on credit cards is a really important thing for me and I even listed down getting out of credit card debt as one of the important things to do before you start investing.
To most people, this is because credit card debt brings very high interest with it and that is money down the drain, and while that is a big reason, it’s not the biggest reason by a stretch.
The big reason for me is all the wasteful spending that you are likely doing if you run up credit card bills. When I look at my own bills they are mainly travel, groceries and eating out, and there are several ways that I can and I have reduced them in the past.
This point becomes especially important for people who are fresh out of college and have started earning recently without much financial responsibility to worry about.
Once you get into the habit of spending a “little bit” more than you can pay off with your salary – that little bit only grows every month till it reaches a point where your salary gets over on the first of every month.
This is a ridiculous situation to be in – not only financially, but also in terms of living a meaningful life. If your number one worry is sustaining your lifestyle then that doesn’t allow you to think about growing your net worth or even branching out into things that you truly enjoy doing. Â It just takes a lot of your mind space.
Getting out of this is simple – really simple – spend less than you earn, and if you think it is much more complicated than that then you simply aren’t doing it right.
This brief and excellent post by The Weakonomist both explains why this is simple, and also why it doesn’t need to be discussed a lot – just something to be internalized and live by.