5. Eliminate credit card debt. One of the best investments you can make in your young financial life is to eliminate high-interest credit card debt. With the average interest rate hovering around 13%, credit card purchases can get really expensive, really fast. As personal finance author Beth Kobliner notes in her book Get a Financial Life, when you pay off a credit card bill with a 14% interest rate, “you’re in effect paying yourself 14%, guaranteed, and tax free.” That’s an amazing return on investment!
Make it a goal to pay off your credit cards as soon as possible. There are several approaches to doing so, which you can read about here. Once you’ve got them paid off, consider getting rid of them. I know there are all sorts of arguments for keeping a credit card around — they’re great in emergencies, you can earn rewards and cash, etc. I don’t deny that, if used properly, a credit card can be an extremely useful tool. It’s just so laden with possible pitfalls (accidentally miss a payment, rate hikes, etc.) that the downside often outweighs the benefits.
It’s possible to navigate life without a credit card. After Kate and I paid off our respective cards about nine years ago, we never renewed them. We just pay cash for everything (in the form of a debit card, or actual greenbacks). I’ve yet to regret the decision.
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