This Is Devastating to America’s Credit Score – Episode 1036

Credit card debt in the US recently reached $1 trillion in the second quarter of 2023 – for the first time ever. Economists cite reasons like inflation and rising interest rates as major contributors to this debt crisis. But here’s what I dislike about that narrative: it leaves consumers feeling entirely powerless.

We can’t control inflation or what interest rates are doing. But we can control our financial destiny. On today’s show, we’re going to talk about what’s really behind this mounding credit card debt. You’re also going to learn some solid solutions you can put into place to fix your credit score.

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Here are a few reasons why so many Americans are struggling with credit card debt:

1. A lack of financial education. There’s no financial education in the US, and that really hurts a lot of people. Think about 18-year-olds who just got out of high school. They’re suddenly legal adults who can make financial decisions for the first time. And most colleges allow credit card companies to market their product on campus. This sets up Americans for a lifetime of debt and high interest payments. I know this because it’s exactly what happened to me. Once you get yourself into that hole, it’s hard to break the cycle. And most people just don’t know better. Credit cards aren’t inherently bad, but if you don’t understand how to use them wisely, you can get yourself into a lot of trouble.
2. A lack of streams of income. Most people have one source of income: earned income from a 9-5 job. Depending on one income stream can be problematic. If you want to have financial freedom, let alone pay all of your bills, creating multiple streams of income is key.
3. A culture that tells us we always need more. Bigger homes, better cars, updated phones, tvs, and computers. Listen—I like nice things as much as the next guy! But if you’re digging yourself into a financial hole at the rate of 20% interest, there’s an issue. When you learn to be content with what you have and stop trying to keep up with the Joneses, you’ll be able to put a stop to credit card spending. This is not to dismiss the fact that there are people out there actually struggling to pay their bills and provide groceries for their family – that’s not what I’m talking about here. You can’t deny that marketing and social media make people feel like they always need more, and that comes at a price.
4. Predatory rates and standards. USA Today recently reported that store credit cards have climbed to record interest rates of 33% — and essentially that these companies can charge whatever they want. Credit card rates have risen in conjunction with all rates the past few years, but store cards are especially exorbitant. There’s no protection for you as a consumer, these banks and lenders will do whatever they can to get their hooks into people, and they prey on a lack of financial education.

Here are a few things you can do to begin taking charge of your situation.

1. Know your numbers and where you’re starting from. The first step is to create a balance sheet that gives you a holistic look at your finances. What are your liabilities and assets? Write down all of your debts, including amounts and interest rates, so you have a clear understanding of your total debt.
2. Make high interest debt your number one enemy. Anything you’ve listed out that has a rate above 8-10% should be paid down as quickly as possible. If you have credit cards that are racking up interest to the tune of 20%, it can be difficult to make progress on your financial goals. Start where you can, and set an intention to pay down these high interest debts.
3. Begin thinking of ways to diversify your income streams. Whether you buy a performing asset, start a business, or even pick up a side hustle like Uber or Doordash. More income will help you pay down your debts faster. Remember, relying on one income stream is going to make it difficult to reach your financial goals. This is a topic I could speak about all day, but I want you to consider how you can add another income stream. Rental properties, freelancing, entrepreneurship, investing, affiliate marketing, and digital products are just a few ideas of ways to start expanding your income. My favorite way to create streams of income is through real estate investing, and I have tons of videos here to help you learn about realistic ways to add rental properties to your portfolio.
4. Consider ways to lower those exorbitant interest rates. Whether it’s through negotiation, consolidation, or balance transfers, there are ways to knock down those high interest rates so you can actually make progress on paying down debt. Otherwise, the interest continues to add up, costing you more money each month.

There’s not one solution to the state of consumer debt in the US, but there’s a lot you can do to get your personal finances in order. I hope this video gave you some things to think about, and some ways to take action.