Friendly Advice from your Credit Card Company
I put a feeler out to friends and family to keep an eye out for advice from their banks, credit cards, financial planners, etc. This tip was brought to you by Providian Financial.
Monthly Credit Tip
High levels of debt have you singing the blues? Work to reduce your balances by creating a budget and starting with the highest or most expensive debts. Lowering your debts can save you in interest and could also help improve your credit score.
While on the surface this appears to be good advice, for the average person this simply won’t work. Human beings require feedback and accomplishments to keep themselves energized and focused on a goal. A better way to do this would be to create the budget and list out debts from lowest to highest. Then start knocking them out in that order. Each time you knock out a smaller debt, you’ve taken a big step towards your goal and you then roll what you were paying on the smallest debt into the payments to the next debt on your list; working you way through until they are gone. This is also commonly known as working the debt snowball.
I realize that there it is a valid point that you will be continuing to accumulate more interest on the bigger debts, but for the average joe, working and working on a large debts without ’seeing’ some immediate results might be enough to push them back into old habits. Additionally, if the goal is to become totally debt free, the amount of interest on the large balances will be negligible when you consider that the average household has the means to become totally debt free within 12-24 months (with exception of home mortgage).
Bookmark:
del.icio.us Digg Furl Reddit
