How Many Vacation Days is Credit Card Debt Costing You?

Today, I want to help you learn something that I knew or at least I thought I knew, but then because I was little to clever with things, it ended up kicking me in the butt and took me awhile to figure it out Maybe you're in the same situation

Now, if you look at statistics on credit card debt for Americans, you'll see numbers anywhere from 4,000 to 6,000 per individual or 10,000 to 16,000 per household And it'll all depend on whether you look at households that are carrying balances or not carrying balances, so there's a lot of data that you can read either way Rather than try to prove anything, I want to just show you a mathematical example of what it can be costing you in vacation time for you to be carrying credit card debt And what I'm going to do like I usually do is use an example that's somewhat easy on the math as far as using some round numbers here So whether you're listening to this or watching this, hopefully, this will be easy to digest

Imagine you have $12,000 of credit card debt, and you're paying 25% on that 25% of that would be $3,000 In other words, a quarter of $12,000 would be $3,000, and if you divided that, that would be $250 per month that you're paying in credit card interest You're paying that with after tax dollars, so there's no tax breaks on that It's not like a mortgage that could get a tax break or student loan interest

And that's what you're paying just let's say to carry a balance Let's assume for a moment, again, round, pretty, simple numbers, that you're earning $10 an hour You're taking home a little bit less than that because you're working, let's say eight hours a day, so $80 a day, eight times 10 And again, just to keep things simple, let's say that your taxes in total, brackets, everything, costs you 25% of your paycheck So you're taking home $60

Well, $60 times four would be 240 bucks per month, right around the same number we just looked at So it would be costing you four days per month to carry this balance Nobody's giving you anything extra for that You're not getting any benefits for that You're just working four extra days just to tread water with your credit card interest

Now, you might say, wait I make more than $10 an hour Okay, what if you make $20 an hour? Well, similar concept, you're making more You're taking home $120 per day, let's say And it's still costing you two days per month

That's two Fridays per month you could be taking off if you were able to get on top of your credit card interest And if you're making $40 per hour, same concept, just slightly different math You're taking home about $240 per day, so it's still costing you one day per month That's one vacation day per month That's 12 days per year for you simply to carry credit card interest

You're getting nothing additional in benefits for that So I want you to think about this from a standpoint of what it means to be carrying interest that's just really high interest It's not getting you anything It's not backed up or guaranteed by a home or a car This is just money that was spent that there was nothing else to cover it

So whether your numbers are exactly like this or slightly different numbers, this is the basic concept So what do you do about it? How can you reduce your credit card debt? I come from the generation where we were first introduced to credit cards when we were 18 and 19, and they had these mass mailers that would come out My parents' generation didn't experience this The most I ever had was a checking account that was signed on with my parents So credit card debt for a lot of people got them in trouble very quickly

Now, today, student loan debt might be doing the same for some people That's a little bit of a different conversation But the concept of having a lot of debt impacting your situation, especially when it's not guaranteed by anything is really brutal on you So first thing you can do is get clear about what is it that's more important to you than either overspending on your current lifestyle or that's important enough that you want to take time off where you say, gosh I gotta get a handle of this credit card debt so I can start taking Fridays off or one Friday a month or two Fridays a month, whatever it might be

So you have to have a goal that's more exciting than what you're currently doing with your money otherwise you'll say, wait I'll just keep paying for my premium cable channels, my latte Frappuccinos, whatever they are I'll pay for all these premium price things that maybe I don't need, but I haven't thought of something better The second thing which ties along with this is to reduce your current lifestyle spending This is not about trying to make your life horrible

This is about saying, okay What could I cut away that I'm really not even using? Very often, gym memberships are not being used Maybe it's you I've done that sometimes Who knows? Maybe you're not using the premium cable channels or you're recording DVRs, but you're recording it here

You've got an HD recorder here and another feature over here and other cable channels over here See what you could be saving money on Very often you can renegotiate credit card rates You can call the bank and say, hey Can I get a break on my credit card interest? And they might not say forever, but they might say, okay

For six months, we'll get you to 20% or 15% Remember, banks are not necessarily evil, but they're not your friends And I'm sure some of the people who work at banks might be your friends, but the banks just want to make money They love credit card customers Credit card customers pay the highest interest rates

They want to keep you Know that If not, we'll find a way to go somewhere else, and you can always go to credit counseling as well if you're ready to cut up your credit cards But let's say you're not at that stage yet, although that can be very important and very helpful if necessary Sometimes you can get a 0% balance transfer credit card with another company

This is a catch 22 If your credit's really not good, and your credit score is bad, that might be tougher The other thing is you gotta be careful that you don't go and spend that money as well It's one of the traps I got into when I was younger and thought I knew a lot more than I did today Throw away all the other new credit card offers

If they're not good, if it's something that's just going to get you further into credit card debt, just throw them away Unless it's going to be a lower percent interest rate, and you're going to cut up another card or in some way to again reduce the total amount of either interest and/or total debt you have, stay away from it Pay off your highest balance credit cards first This is really one of the core strategies of doing credit counseling, but again, a lot of these things like doing that and renegotiating your credit card rates are things you can do without having to use a credit card counseling company Again, they can be awesome, but sometimes it doesn't necessarily work out for you

Temporarily, this is a huge one, the temporarily part Reduce investments in your savings if necessary Again, this is another tough one because if you do this and get in the habit of doing this, then you just might adjust your lifestyle and just start spending more, and now you're not saving But in the short run, if you say, wait You know what? I've just got say this $12,000 credit card debt

I've been saving $500 a month into my savings I could knock out that 25% interest quickly and get back to my savings My savings aren't making me 25% weighed, so again, mathematically, that can make sense But since we're humans and sometimes do foolish things, that can hurt you if you don't execute properly Track your credit score and work to improve it

This can be done very often with your bank on the online website you have for your bank They might say, hey You can get your credit score If you can't do that, I've used at times CreditKarmacom to look at my score, and again, track things over all, looking for habits that help you reduce your credit score

Excuse me Help you increase your credit score so that you can reduce your credit card interest as a result of that Number nine, create a budget It sounds old fashioned It sounds boring

But at the end of the day, a lot of this is just math And then finally, track your finances monthly I've used Quicken for years At times when I've not done well with my finances, I've kind of ignored it and put it to the side and said, you know what? I'm too smart for this stuff I'm just going to go do other stuff

And as a entrepreneur sometimes I'd say, well, I'm just going to make it I'm going to out-earn this I'm going to make so much money that the fact I'm paying high interest rates whether it be on credit cards because of personal lifestyle spending or in my small business taking risks that were maybe bigger risks than I should be taking, I'd convince myself Well, I'll out-earn this And sometimes you don't

So track your finances monthly If it's small business it might be QuickBooks or one of the other tools that does that So if you want further help with this, you can go to 4daytoolscom, and you can get a tool an Excel-based tool that's the vacation debt calculator to help you free up more time and see what it's costing you to not be making the most of how you're managing your money

If you want to get the show slides and the notes from this one, you can go to 4dayentrepreneurcom, and then if you want to start creating your 4-Day Work Week Game Plan, go to 4daygameplancom And this really integrates the concept of the budgeting your income and how you start creating the plan that gets you to 4 days As I've told you before if you've watched any of my videos or listened to any of this

It took me 22 years to lock in a four day work week where I was working a 4-Day Work Week at least 90 to 95% of the time Many years to do that It doesn't need to take that long It's a lot easier today than it used to be So if you have any questions on this, put it in the comment section below or shoot me an email

As always, I look forward to helping you create the lifestyle you most desire and helping you make more money in less time doing what you do best Thanks for listening