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Caleb Hammer, a financial YouTuber, has tips for those with maxed-out credit cards and thousands in debt. Read on to find out what he advises.
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Credit card debt can easily take over your life and leave you struggling financially. If you find yourself with maxed-out credit cards and thousands of dollars in debt, you are not alone. And thankfully, there are ways to get out of this situation. Finance YouTuber Caleb Hammer, helps people get out of debt via his show, called Financial Audit. In a recent episode, a 27-year-old married man named Johnny called into the show, asking for advice on how to pay off $35,000 of debt on eight maxed-out credit cards. Here is Hammer’s advice and whether it’s worth following if you’re also trying to get out of debt and get your finances in order.
Don’t be a “credit card” person
Caleb Hammer’s first advice to anyone dealing with credit card debt is to stop treating themselves as “credit card people.” Johnny had spent $748 on overdraft fees so far this year, and including money owed on his car loan, was in just over $35,700 of debt with minimum monthly repayments of about $1,000.
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With Johnny and his wife in a vicious cycle of paying off cards then getting into debt again, the only ones benefiting were the credit card companies. Credit card companies make money by luring people into debt with convenient access to money and attractive offers and rewards. This can lead to a cycle of overspending.
Hammer recommended that the couple tell themselves they were “not credit card people.” Credit card people let the system take advantage of them. By acknowledging that they are not “credit card people,” Johnny and his wife can distance themselves from the temptation of overspending on credit.
Hammer also suggested that Johnny cut up the credit cards and never use them again. This may seem drastic, but it can be an essential step to breaking the cycle of overspending and accumulating debt. Without the credit cards, Johnny and his wife will have to learn to live within their means and only spend what they can afford. It may be tough at first, but it will be worth it in the long run. Credit cards can be a secure and convenient way to make purchases, but if you’re struggling with debt, it might be worth it to take a break from them.
Use the snowball method
The snowball method is another strategy that Hammer suggests for paying off credit card debt effectively. This debt payoff method involves paying off the smallest debt first and then moving on to the next smallest one, regardless of the interest rate. By doing so, Johnny and his wife can see progress and feel a sense of accomplishment with each debt paid off. This momentum can keep them motivated to keep going and eventually pay off all their debts.
Managing debt can feel overwhelming, In addition to the snowball method, there are several other options you can use. The debt avalanche method is where you focus on high-interest debts first before tackling lower interest loans. Debt consolidation is also a popular option, where you combine multiple debts into one monthly payment with a lower interest rate.
Whatever option you choose, it’s important to have a solid plan and stick to it in order to reach your goal of becoming debt free.
Stick to a budget
In addition to using the snowball method, Hammer recommended that Johnny and his wife look for ways to reduce their expenses and increase their income. They can cut back on non-essential expenses like dining out, entertainment, and shopping. Hammer laid out a recommended budget for Johnny and his wife, which left $1,010 a month to pay off their debts. By sticking to it, they could be debt free in a year and a half.
If you’re learning to budget, it can be helpful to identify the root cause of your financial struggles. Why did you get into debt in the first place? Was it due to overspending or an unexpected emergency expense, or did you just lack a financial plan in the form of that budget? By understanding what led you to your current financial situation, you can create a plan to avoid making the same mistakes in the future.
Once you know how you got into trouble, it can help make sticking to a budget much easier. Budgeting apps can also streamline the process and give you encouragement along the way. Apps like Mint and Rocket Money allow you to link your bank accounts in order to get an overview of your finances. The insights provided by these apps are invaluable when it comes to money management. For example, they can show you which areas of your spending could use improvement, where you’re wasting money, and how much money you can save by cutting back in certain areas. While it can be difficult at first, sticking to a budget will help you pay off your debts while meeting your other financial goals.
If you are in a similar situation with maxed-out credit cards and lots of debt, it’s essential to take immediate action to get out of it. Following Hammer’s advice can be a great start in breaking the cycle of overspending and debt, and check out the other recommendations above, like different debt payoff techniques and budgeting apps. Remember that getting out of debt takes time and effort, but it’s worth it in the end. Ultimately, paying off debt can help you get your personal finances in order and achieve financial freedom!
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