Back in the days when I was young, folks had rules about the affordability of rent. It was called the One Third Rule: one third of your income for rent, one third for food and bills, and one third for savings.
Nowadays, most people need another third for paying credit cards.
I remember when Chargex—the forerunner of Visa—came on the scene. It was the day the world’s economics began their descent into hell.
We live in dangerous times when the lure of materialism has ensnared many an innocent before they have barely left highschool. The worst thing anyone can do, these days, is run up credit card debt. It is very hard to get eliminate and eats up monthly what could allow a person to live more comfortably and/or put into savings.
The best way to get out of credit card debt is #1: stop using your cards and cut them up and #2: try to amalgamate all your debts into one payment if possible and at a lower interest rate if you can. This last one usually requires collateral to achieve and that means a house or car with principal accrued. Sometimes, if you are lucky, you might be able to get a relative to co-sign a loan with you but then they have to qualify as well.
If you can’t get a loan, the next best way to pay things off is #3: list your debts from smallest to largest. Put minimum payments plus about $20.00 on all the debts except the smallest. Take every spare cent you have and slap it onto the card and pay it off as soon as you can. When it is gone, cancel the account and start on the next smallest debt, this time taking what you put on the first one as well as what you have been putting on the second one and combine them. This will bring the second down faster. Continue this formula until you are debt free.
Once the debts are gone, pick the best card with the lowest interest rate and keep only that account. Set the card aside, preferably into a safety deposit box and use only when traveling or for emergencies. Then pay it off immediately. You will also have a good credit rating by then and so call up the lending institution and tell them you want a lower interest rate. Don’t be surprised when they give it to you.
Once you are debt free, you can establish the One Third Rule and begin to save money. Find a high-interest savings account to put your money into. Talk to your bank. Be very careful about stocks. Even the best and supposedly safest can crash.
Today, it is very difficult to find accommodation with one third of your income. I am truly aware of that. You may need to make an adjustment and use one-half your income for rent and one-quarter for food and one quarter for savings. Do whatever you can, but try to save something monthly. We will talk more later about ways to live cheaply. For now, think debt free. That’s the most important.