The First Step Toward Building a Better Life
A financial topic that everyone can relate to... 'It was like I was drowning'... One of the biggest issues for many Americans... You don't need a lot of extra cash to escape... The first step toward building a better life...
My jaw dropped as more hands shot up across the room...
A few weeks ago, I (Jeff Havenstein) sat in a third-floor conference room at our Stansberry Research headquarters in Baltimore. My colleague and professional mentor, Dr. David "Doc" Eifrig, was hosting one of his regular lunchtime lessons with our customer service team.
Longtime Digest readers know Doc lives a busy life... He's currently in the middle of harvesting grapes at his winery in California, where he makes and bottles his own wine. (Check out Eifrig Cellars for the latest releases. Due to demand, there's a minimum order of one case.) Doc also loves to travel the world, but he still manages to keep up with medical conferences and other business ventures.
Although he has a million things on his plate, Doc always makes time to meet with our customer service staff... He loves to sit down for lunch with them several times each year.
Doc wants to know exactly what our customers are saying. He always wants to find out how we can improve our business. And as he always tells me, there's no better way to learn about your customers than talking with the folks who interact directly with them every day.
But Doc hosts these lunches for another reason...
He also genuinely cares about all of Stansberry's employees. He wants everyone to succeed – not just here at work, but in life, too.
During the lunch meetings, Doc typically walks through an educational lesson. Sometimes, he gives a crash course on options trading. Other times, it's about bonds or another financial topic.
This time, Doc was covering an important topic in which he's one of the biggest experts we know. It's a topic that everyone can relate to... personal finance.
About halfway through Doc's lesson, he asked the customer service team to raise their hands if they had any credit-card debt.
To my surprise, more than half of the few dozen people in the room put their hands up. It caught Doc off-guard, too... because he knows each person in the room makes more than enough money to live comfortably.
As Doc continued his lesson, I couldn't help but wonder what my friend Jenny would think...
Jenny recently earned her MBA. She works as an accountant at a law firm in Washington, D.C. And like all the other poor souls living there, she pays an arm and a leg for rent.
In her free time, Jenny loves to travel. She is going to Germany for this year's Oktoberfest. Jenny likes to wear brand-name clothes and goes out to dinner with her friends regularly.
At a glance, Jenny appears to be thriving. Her salary and annual bonus seem to be more than enough to keep up with expensive city living and her lifestyle. But that's not true...
While Jenny has a good job and a great life, unfortunately, she spends more money than she makes (something I'm sure a lot of us are guilty of from time to time). She maintains her lifestyle by putting what she can't afford on a credit card. As Jenny told me recently...
It was like I was drowning. Just when I thought I was able to take a few breaths, I felt like I was being pulled back under.
Jenny's trouble is far from an isolated incident...
After our meeting with the customer service team, Doc shared a similar story with me. He told me about one of his friends who almost went bust during the financial crisis due to credit-card debt.
Fortunately, Doc offered his friend a loan with an ultra-low interest rate and a multiyear payment term. The friend eventually paid off his loan to Doc with no hiccups.
It seemed as though Doc's friend was turning his finances around. And although Doc barely made any money on the loan, he was glad to save his friend a lot of money – and worry – by significantly reducing his total amount of interest paid.
However, Doc spoke to this same friend a few weeks ago... Embarrassingly, he admitted to Doc that he was back in serious credit-card debt.
The truth is, credit-card debt is a major issue for many Americans...
According to NerdWallet, the average credit-card debt among U.S. households with credit-card debt is more than $15,000 today. The average interest rate is around 17%. That means the average American household with credit-card debt pays more than $2,000 each year in interest.
We're also starting to see more people not making the required payments toward their credit-card debt... The percentage of credit-card balances that are 90 or more days delinquent has climbed in recent years – from 7% at the end of 2016 to 8.3% today.
If you want to get ahead in life, you must eliminate your credit-card debt as soon as you can...
But it's an extremely difficult situation to escape from.
Interest rates on credit cards are high compared with other types of debt... Most rates are between 15% and 20%. As a result, if you're just making small payments on your credit cards each month... you're mostly paying off the interest and not the actual principal.
Last year, in Doc's free daily e-letter, Health & Wealth Bulletin, we shared the following example to show readers how credit-card debt can make your life miserable...
Let's say you have three credit cards, two with $35 minimum payments, and one with a $55 minimum. You have $200 to split between paying them off...
If you had just made the minimum payments each month, you wouldn't be debt-free until 2034.
It would take 15 years to be debt-free under that approach – and that's if you didn't spend another penny on your three credit cards between now and then. That's absurd.
Under that scenario, you would pay about $8,000 in total interest. That's significantly more than the combined principal of all your credit cards ($5,500).
It's sad, but some folks only have $200 a month – or less – to pay off credit-card debt...
In May, the Federal Reserve reported that roughly 40% of Americans would struggle to pay for a $400 emergency expense. If an emergency occurred, these folks would have to sell something or borrow more money to cover it. And unfortunately, a lot of that borrowing comes from credit-card companies.
But even if you don't have a lot of extra cash, you can still escape your credit-card debt...
According to Doc, one of the best ways to deal with suffocating credit-card debt is to apply a strategy called a "debt avalanche." More from that Health & Wealth Bulletin...
This strategy (also called "debt stacking") focuses on interest rates, rather than balances. So your goal is to pay off the cards with the highest interest rates first. Mathematically, this strategy usually saves you the most money on interest...
Here's the order you'd pay your cards using the debt avalanche, as well as the interest saved and pay-off dates...
Overall, your payment process would be the same. As a card is paid off, you roll that payment into the card with the next highest interest rate.
By using this strategy, you would pay off all your credit-card debt by September 2022... 12 years earlier than the previous scenario. And you would save more than $6,000 in interest.
It goes without saying that credit-card debt can wreck your financial well-being...
But if you're drowning in credit-card debt, your troubles likely won't stay inside your wallet.
You see, as Doc told his Health & Wealth Bulletin readers, credit-card debt can also damage your mental health. Money troubles can cause stress, anxiety, and even depression.
So if you're struggling with credit-card debt today – or know someone who is, like my friend Jenny – don't wait another minute. Take the first step toward building a better life... financial and otherwise... by putting this simple payment plan in place immediately.
Doc can help anyone learn how to successfully trade options or spot the best income opportunities...
But he enjoys it just as much – if not more – when he can help folks like you succeed with more than just investment tips.
That's why Doc fills each daily issue of his Health & Wealth Bulletin with "hacks," ideas, secrets, and strategies that can save you money... save you time... and even save your life.
If you're not already reading the Health & Wealth Bulletin, I encourage you to join the nearly 95,000 folks who already receive Doc's tips on a daily basis. It's completely free... Click here to get started.
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Several readers sent praise for Dan Ferris' Friday Digest. What did you think? Let us know at feedback@stansberryresearch.com.
"'Stop Quacking Like a Duck' was a great essay. Thanks, Dan." – Paid-up subscriber Michael M.
"Great job Dan. I feel alive after that, like I use to with a lot of Porter's Digests. Your writing had emotion and that's inspiring!" – Paid-up subscriber Mark G.
"Any guy who can quote an obscure passage from Shakespeare (I memorized that same passage at a tough Eastern prep school more than a few years ago) and dispense financial wisdom at the same time is OK in my book." – Paid-up subscriber Stuart W.
"Mr. Ferris, Ken Griffin of Citadel is borrowing $500 million, collateralised by his share of the hedge fund he manages, for the single purpose of TAX AVOIDANCE. Because of the notorious carried-interest loophole, as long as Griffin keeps the enormous fees he earns inside the fund, without withdrawing it, he pays no taxes on those earnings. Whatever he pays in interest costs from borrowing against his share of the fund is dwarfed by the compounding effect he gains by deferring income taxes. I expect he intends to defer those taxes forever, so that his heirs will get a mark-up in basis. Thanks for your great work!" – Paid-up subscriber Marc E.
Regards,
Jeff Havenstein
Baltimore, Maryland
September 30, 2019