6 Ways to Navigate Crazy High Interest Rates!

Transcript:

On this episode of the Personal Finance Podcast, we're gonna talk about how to navigate these crazy high interest rates.

What's popping everybody and welcome to the Personal Finance Podcast. I'm your host, Andrew, founder of Master money.co. And to. Day on the Personal Finance Podcast, we are gonna be talking about how you can navigate these crazy high interest rates. If you guys have any questions, make sure you hit us up on Instagram, Twitter, TikTok threads at Master Money Co.

And follow us on Spotify, apple Podcast, or whatever podcast player you love listening to this podcast on right now. Now, if you wanna help out the show, leave a. Five star rating and review on Apple Podcasts, Spotify, or your favorite podcast player. I cannot thank you guys enough for leaving those five star ratings and reviews.

They truly mean the world to me. And if you wanna watch this, you can watch this on the Androgen Cola YouTube channel where we have all of our YouTube videos and we have this podcast on that channel, and we have visuals and other things on there as well. Now, today we are gonna be talking about how to navigate crazy high interest rates.

And right now, as interest rates continue to be adjusted by the Fed, we are going to have to figure out how to navigate these interest rates. And if these interest rates go up over time, we're gonna have to figure out some different ways to navigate this stuff. And. In this episode, we're gonna be talking about what considerations do you have when you're buying a house?

What considerations should you have with a vehicle? How should you think about your credit score? How should you think about cash and how should you save cash? And we're also gonna talk about how this impacts the market as well, because interest rates directly impact the market historically. We're gonna talk about how that works, and we're gonna talk through all the do's and don'ts through all these situations Now.

Some of the things that we need to realize first is why does the Federal Reserve even increase and or decrease interest rates? Well, there's a number of different reasons, and the number one reason right now that the Fed is making adjustments to these interest rates is to combat against inflation. For the last couple of years, inflation has risen.

Rapidly, and that is a major problem. If that happens for the long term, you do not want inflation to rise rapidly for the long term. So what the Federal Reserve tries to do is they try to increase interest rates to keep that inflation in check. Now, when the economy is growing really quickly, prices can start to rise.

Rapidly, which causes that inflation. And by rising these interest rates, the Fed can slow down the rate of which money flows through the economy because it is much more expensive to borrow money. The second reason is to stabilize the economy. 'cause if an economy is growing too fast, and you may remember this from your economics class, if you took any in in college, or maybe even in high school, It is called economic overheating.

And when this happens, it can cause economic bubbles. Like we had the tech bubble, we had the great recession. So sometimes you want to slow this process down, and that's another reason why the Fed may increase interest rates. Another reason is to encourage savings because bond rates go up, high yield savings accounts rates go up, and so this encourages savings for things in those types of accounts.

CDs, a bunch of other stuff. We're gonna talk about that later. And what to do with your cash. It also helps to maintain a balance between inflation and unemployment, and then sometimes they also do it to normalize monetary policy. All of these are just some of the reasons that are out there. There could be other reasons involved based on each year and each specific situation, but these are just some of the things to consider, and it's very good to know some of this stuff because if you know why the Fed is raising interest rates, you can react accordingly, and that's very important to.

Understand how all this stuff works. Maybe you fell asleep in your economics class back in the day, but actually economics is actually one of the most valuable classes that you can take in college. Little pro hint, if you are in college, that is something that's actually going to help you over time with a lot of different things, including business.

So those are just some of those reasons. We wanted to get that outta the way at the top of the show so you understand why some of this stuff may happen, because it's gonna pertain to some of these things that we're gonna talk about in this episode. So if you're into this, let's get into it. Alright. The first thing we are gonna be talking about is your car and what should you do with your car?

You should drive that good old fashioned clunker just a little bit longer if interest rates are high. So I am a big proponent here at the Personal Finance Podcast and at Master Money for driving your car for a long period of time. Now, I've talked about this in the past because if you drive your car for a longer period of time, you are going to have longer time periods where you do not have those monthly payments and monthly car payments Ingrain this into your brain because monthly car payments will absolutely destroy your wealth.

There is nothing I hate more than your monthly car payment on something that is a depreciating asset. Now we all need to ghost ride the whip to work. We all need a way to get from point A to point B. Do we need to drive luxury vehicles or these crazy cars to get from point A to point B? Absolutely not.

Now, if you're a car person, hey, I get it. Some people are car people. I am not one of them. But if you are a car person and that is your thing, that is what brings you a ton of value. I know a lot of people like this. I have a lot of friends like this. If cars bring you value, that is a different story because you're gonna take your value dollars and spend them on those things that bring you value.

No problem here. If cars don't bring you value and you are just driving those cars to show off and be flashy, a great thing to do is to drive your car longer. Now, let me give you a bunch of reasons why. Now, there's gonna be a bunch of reasons why, but the facts are all here because interest rates are rising, and so as interest rates are rising, the last thing I want you to do is.

Upgrading a depreciating asset and taking on more debt with high interest rates. So according to LendingTree, right now, the average car payment for new vehicles was a record high this year at $725 a $725. Car payment is way too high for most financial situations. So we've talked about our rules for car buying, and one of our rules for car buying is 20% down.

Four years on the car loan max, I'd rather it be less, but four years on the car loan max. And 7% of your total income should be in car payments, 7%. So $725 based on the national average of what most folks income is, is not even gonna be close to within that range. People are taking on these higher loans because these loans have higher interest rates.

So if you have a car that is perfectly fine. It is a perfectly safe vehicle and it suits all of your needs. There is no reason to upgrade your vehicle when interest rates are this high. In fact, NerdWallet is reporting that the average auto loan interest rate is now 6.58%. So anything above a 6% interest rate in my classification is high interest debt.

You wanna get rid of that debt as fast as you possibly can. So for most situations, I really don't want your interest rate above 5%, but we are adjusting it to 6% for these high interest rate environments. That's the only time we will adjust it. Anything above 6% is something where it is going to be too high.

I don't want you paying those interest rates that are that high because compound interest is gonna be working against you instead of for you. So what you need to be doing is ensuring that you are paying down debt like this. There's a bunch of other reasons why it's way better to continue to drive your used car instead of a new car.

Let's take a looky see to see why exactly that is. So number one is depreciation. Depreciation is gonna get you down bad, especially when it comes to building wealth. Depreciation is gonna bring you all the way down. So here is how much depreciation will actually bring your wealth down. So say for example, you bought a $35,000 car after just one minute of purchasing that $35,000 car, it loses somewhere between nine and 11% of its value.

The moment you drive it off the lot, that is absolutely insane, and that statistic continues to rise over time. But it is completely insane that you can buy an asset that goes down in value and immediately goes down in value one minute after you drive it off the lot. So basically, if you buy that 30.

$5,000 car and you drive it off the lot and you're driving it away. One minute later you are making it rain, $3,500 right out the window, just making it rain out there. Let's fast forward 12 months. 12 months down the road, you all have lost about 20% of the value on that brand new car. And unfortunately, that's the exact same time as the new car smell is completely worn off and most people don't even care about that vehicle anymore.

This is why we tell you to put 20% down because you lose 20% of the value over that timeframe after five years. Most vehicles lose 60% of their value after five years, and they lose 10% of their value every year thereafter. So your depreciation hit is going to be massive, and you're gonna be taking a way higher interest rate.

So affordability for your vehicle is gonna be way, way down. The second reason though, Is that you get lower insurance premiums if you continue to drive that used car. This makes a lot of sense if you think about it, because your car is worth less than a brand new car, so your premiums will go down over time.

Now I've had people say to me, yeah, but I upgraded to a brand new car with better features, all these different things, and my premium was the same and even a little bit lower. The make and model matter. If you go from luxury car to a Honda Civic, obviously it's gonna be a big massive difference. But what really matters here is on average it is 50% less.

If you are driving a used car, your premium could be as much as 50% less over that timeframe. So, Actually, we have the averages here. So a brand new car, the annual average for full coverage is $4,201 for a five year old car. The annual average is $3,211 For a 10 year old car, the annual average is $2,108.

And for a 15 year old car, the annual average is $2,008. So if you drive a car for 10 years or longer, you're gonna be saving over $2,000 every single year towards insurance costs. This is a fantastic thing for your bottom line because that means you can take $2,000 additional every single year and start investing those dollars.

And we know how fast compound interest can react if you have a longer timeframe. So if you're taking $2,000 a year over the course of 30 years, you are truly gonna see a major. Opportunity costs. Number three is if you do keep driving that car, you avoid financing costs. So dealer fees, title fees, registration fees, and this is before you throw that $3,500 out the window.

All from buying that brand new car. Your interest rate, you don't have an interest rate if you have a paid off car. So that is another pro sales tax is also a massive one. Remember, every time you buy a car, say for example, you buy a $25,000 car, all of a sudden it seems like that car costs you $31,000.

That's because it does, because of all these additional fees. So you're not really buying that $25,000 car. You're buying a car that's $31,000. It's because all of these additional things, And when you factor an interest rate, it's gonna be another two, $3,000 on a vehicle. So you really, really gotta think through that stuff before you buy a brand new car.

In high interest rates, environments, I do not like purchasing brand new cars. I think you need to wait because it's depreciating asset, and if you don't know what a depreciating asset is, it's just an asset that goes down in value over time. You wanna buy assets that go. Up in value over time. That's how you build wealth.

And obviously there's maintenance and repair costs. This is gonna be the biggest argument for people for driving cars for this long-term period of time. So here's the argument for that, because if you have a car that has a lot of maintenance and repairs, And as long as that car is safe and will continue to be safe, as long as you keep repairing it, you will still most likely come out ahead on maintenance and repairs, then taking on that car payment unless you have a luxury vehicle.

Because the thorn in my side is we have a luxury vehicle that's starting to get a little bit older and the cost to repair that car is. Very, very close to not being worth it at this point in time, but it's completely paid off, so I refuse to trade it in for something new. Here's the numbers because say for example, you take that national average of $725 as a car payment, and you multiply that number by 12, that's $8,700 per year that you would have to cover if you buy a new car.

The likelihood of your old vehicle having $8,700 per year in repairs is very, very unlikely. Now, I'm not counting stuff like maintenance tires and all that other stuff. You're gonna have to replace those on new vehicles too. What I'm talking about here is your big time repairs. Maybe a transmission goes out yet to replace that transmission.

Maybe your oil pan is leaking and you have to. Replace that for $2,000. Maybe you're having issues with your AC and you have to replace that for $2,000. I don't really care if your repair is worth more than your actual car value is. What I care about is how much you would be paying if you bought a new car.

That's how you have to do the math. The biggest thing for a lot of people is they get a big repair bill and the repair bill is worth more than their car. And they have this old Honda Civic, for example, and the repair is $4,000 and the civic is worth $3,000. But if you are gonna take on an $8,700 car payment next year, then it's worthwhile to consider doing the ma.

It's in repairing that car. So the bottom line on this is make sure you continue driving your cars in these high interest rate environments. Number two is maybe it's time to rethink that M T V cribs house purchase that you're trying to make. So for this one, I want you to rethink your house purchase, especially in these high interest rate environments, because if you've been on social media for any point in time, you've seen people talking about how impactful it can be to have a high interest rate on your mortgage instead of a low interest rate on your mortgage.

Now, argument number one is gonna come up. Then I could refinance whenever I want. The problem is, and that's great, you definitely should if you have a high interest rate mortgage, but we don't know when interest rates are gonna drop. We don't have a crystal ball or know what's going to happen in the future.

So because of that, you are taking on a debt that you have to anticipate paying off the entire amount of debt. Now, should they drop in the next 30 years? Sure they should drop in the next 30 years, but we have no idea what is going to happen. And I know this is a very difficult one to swallow and I will talk about reasons why you wanna buy a house that are not financial later, because I don't think a house is really not a financial investment.

If you are, primary residence is where all your net worth is, then you are truly not wealthy because that is one where you wanna make sure. That you keep the majority of your wealth outside of your primary residence and put the majority of your wealth into different income producing assets, index funds and ETFs, rental properties, and real estate and other assets that produce cash flow, things like that.

So making sure that we clarify that a personal residence is not a very good investment. In fact, historically personal residents have returned about 4% to people, and so you can get more in a high yield savings account right now than you could with your personal residents. Now. A lot of people don't like it when I say that, but if you run the math and you go run the numbers, it is absolutely true.

Go look at the historical data. Go run the numbers, because what you're not factoring in is total cost of ownership or T C O if you don't know what that is. We've had a ton of episodes on that. I'm not gonna harp on it here again. Now, one of the biggest things that we need to talk about here, though, Is the impact of these high interest rate environments on your money when you buy a house.

So the impact of the high interest rate environments on your money, two big ones up top are higher mortgage payments, meaning this is the one that is the most direct impact. Your mortgage payment could be significantly more, and I'll give you an example here based on interest rates. So if your interest rate is higher, it's gonna be significant.

And I mean, this is a major, major factor. And then number two, because those interest rates are higher and your mortgage payments are going to be higher, it reduces your purchasing power, meaning you can't get as much house as you actually want to in these high interest rate environments. There is nothing wrong with renting, by the way.

There is nothing wrong with going out renting a house. In fact, I think it's. Easier for a lot of situations to go out and rent until you find the house that you absolutely love, and we'll talk about a little bit more about that in a minute. So the crazy part about this whole thing is that in October of 2022, mortgage rates topped at 7%.

For the first time in two decades. I mean, that is a very high interest rate, and they are more than double 3%. Many Americans could have gotten on a 30 year fixed mortgage a year prior. Let me show you how impactful this is. A $400,000 mortgage at a 3%. 30 year fixed interest rate would've been had a monthly payment of $1,686, but the same exact mortgage with a 7% interest rate would cost a thousand dollars more at 2,660.

$8 a thousand dollars more. You know how much a thousand dollars can compound over the course of 30 years. So say for example, you had to pay down that entire mortgage over the course of that 30 years, the differential between those two interest rates is well over a million dollars in opportunity cost.

Just because you decided that you wanna buy a house in a high interest rate environment. Now, should those rates drop? We are hoping so. For most folks, because I want you to be able to afford the house that you love, I want you to have that housing affordability. I think these interest rates reduce affordability significantly.

And based on this example, you can see exactly why and between these two examples, in the low interest rate environment on that 3% differential, you'd be paying $207,000 in interest over the lifetime of that loan. And with the 7% interest rate, you'd be paying 558. Thousand dollars in interest. That's more than $300,000 differential that you were paying for the same exact house just because of the interest rate.

It's the same exact house. This is why I really want you to reconsider buying a house when interest rates are this high. In addition, in high interest rate environments. There is potential for decreased home value. So high interest rates can slow down the housing markets because fewer people are obviously able to afford homes.

This is happening a lot right now. I've seen a lot of real estate agents out there saying they don't have any business because there's not a lot of people buying houses because affordability is down by so much. And if you buy a house right now, this can also increase the cost of home ownership because borrowing money is way more expensive.

So say for example, you wanna take out a HELOC and pull some equity from your house and you wanna remodel your house, maybe you wanna remodel the kitchen and you think you'll get that back when you sell the house down the line. Well, if you do something like that, then it's still more expensive to pull that money out.

So it's increased cost of home ownership because doing things like home improvements can really be more costly because these higher interest rates. The fifth one, and this is one I talk about all the time, you need to understand opportunity costs. If you don't understand anything else, it's one of the most important things you need to understand when it comes to your finances is that the higher interest rates are the more attractive other investment opportunities are.

So index funds and ETFs, for example, when interest rates get to 7%, that is where it is much better to plug your dollars away somewhere else. That's going to compound so much more than it would than plugging it into an asset that is subpar like your house. I. So I want you to really think hard about your home purchases right now if you are in the market to buy a house.

I know delaying home ownership can be painful. It'd be one of those things if you really, really want that house, it's something that you're not gonna listen to me. You're gonna buy that house anyway. I know how human psychology works, but at the same time, I want you to really, really, Think about this because these high interest rate environments can be dangerous for a lot of people.

And if you are not keeping your monthly payments lower than 30% of your income, you are really at risk for becoming house poor unless you reduce the cost of a number of other factors within your budget. You really, really need to consider this. I want you to become successful with your money and this is a very, very big one.

Now, there are a bunch of other reasons to buy a house that aren't not financial. A number of them are stability. When you rent, you usually move a lot more. You get more stability just by owning a house. You get the freedom to customize your house. If you're really into interior design, things like that, you get privacy.

So you can say goodbye to your neighbor's, tap dancing on the top floor. Instead, you get the privacy of your own home. You get community ties, school districts, those types of things. And obviously there's security, there's legacy, there's emotional satisfaction. There's a lot of people buy houses, so their pets can have a fancy yard, but you can do that when renting.

So that's not really the best logic in the world, and you get ghost rights. If your house is haunted, then maybe those ghosts will help you clean up the house or something along those lines. I'm just kidding. But all of these things are reasons that you may want to consider buying a house outside the ghost rights.

Alright. Number three is to save more cash if you can during these high interest rates environments. So this is a good thing for a lot of people in high interest rate environments. Our cash is actually gonna be making us more money. We can actually celebrate this and we can save cash without feeling so guilty all the time.

Just a couple years ago when interest rates were lower, saving cash felt like you were just slowly burning the value of that cash because inflation was rising and there was no interest rates to come up. But cash is not trash at the time of recording this. So there's a number of places that you can put your cash that will really help you increase the value of that cash.

So number one, my number one place to put cash. This is for your emergency fund, for your wedding fund. This is for your car down payment fund for your home down payment fund. All of these short-term goals where you're gonna actually utilize that cash. The number one place is a high yield savings count.

Where do I like high yield savings count anywhere with a high interest rate is great. I like Ally Bank. I like C I T Bank. I like Marcus. There's a bunch of great places to put your money. I like Ally Bank the best because of their bucket system, but I've heard Marcus by Goldman Sachs also has that now.

So we're gonna be looking into that. But their bucket system is just, you can budget your money inside of that savings account. It's a beautiful way to categorize all your different categories. Number two is a money market account. And a money market account works very similarly to a high yield savings account.

They're almost exactly the same. The interest rates sometimes are slightly higher. Then there's things like no penalty CDs. So CDs, you lock in your money for a certain timeframe, and so it is not as liquid as a high yield savings account. So if the interest rates are really close, just go with a high yield savings account.

But CDs, if you have a much higher interest rate, then you can look at those and maybe do something like a CD ladder. Then you have T-bills, which we've talked about. We've had an entire episode on T-bills on how you can get a guaranteed 5% return on your money. These are government backed short-term bonds, and so with T-bills you can buy those usually for a slightly higher interest rate, and these are completely backed by the government.

Great, great option. A lot of really wealthy people, they put their cash in T-bills when they're waiting to buy different investments. And then there's things like you can buy ibo, treasury ETFs, so you can actually put money into ETFs that hold many different bond investments. That's another great option.

And these are a way to get exposure to US government bonds without having to go out and actually buy specific T-bills or go through the auction process that a lot of people hate. So you can look at iShares I Bonds, which is the iShares I bonds Treasury, E T F. That is another one that you can do some research on if you're looking for a place to park cash that I haven't talked about yet.

So, That is a great option if you are looking for another spot. Now, number four is a big one. Number four is to ignore market volatility. So if you have not noticed when interest rates are fluctuating as much as they do right now, the market becomes very volatile. And that's because the market is very responsive to things that the Federal Reserve does.

And one of the things that it is very responsive to is the rise and fall of interest rates. Now, why do interest rates impact the stock market so much? This is a great thing to know, and the reason why I want you to know this, Is not so that you can react to it, but so that you can keep your emotions in check.

One of the best things that long-term investors can do is learn how to keep their emotions in check. And by doing so, the number one thing that happens is continuing your financial education and investing in yourself is going to help you keep those emotions in check. And if you know why things are happening, this is gonna help you calm, cool, relaxed when they happen.

Here's why interest rates changes. Impact the stock market. So when interest rates rise, stocks tend to fall in value because they have lower future earnings. So higher inflation often leads to higher interest rates, which also impacts the stock market. The reason why this impacts the stock market is as the Federal Reserve starts to increase interest rates.

They do this to stimulate economic growth, but when inflation exceeds the target range, the Fed has a target range and they make decisions based on that target range. The Fed steps in and raises these interest rates, and when they do that, this hinders businesses from borrowing money to aid in business growth, which slows the economy down.

So let me put this in layman's terms for a second. When the Fed increases interest rates, Businesses cannot borrow money as cheap to grow their business, and this causes the economy to slow down. So this makes a shift in the market because a number of reasons a investors out there get scared and so they start to buy and sell securities.

But B, when quarterly reports come out or 10 Ks come out, then what happens? Is that maybe profitability isn't as high because they could not borrow as much money to fuel that growth, and so maybe their numbers don't come back and they don't hit earnings. Those types of different things. So this is why the market starts to fluctuate and there's a lot of volatility.

Volatility just means the market goes up and down very quickly, very rapidly. Prices are changing rapidly, and this freaks a lot of people out. People start to panic. They have, when it's really bad, they start to riot in the streets. Not really, but this is something where you really, really need to understand this in order to move forward in the market.

I. And so it does impact different sectors as well. But that's why volatility happens is because there's an impact on the economic growth and those recent market changes can impact things like the s and p 500. It can impact things like the total stock market, for example, and each different sector does have impact.

So bond markets with those high interest rates can lead to increased volatility in the bond market. Currency markets can attract. Investors who are looking for higher returns, emerging markets can take a hit and they're vulnerable to high interest rates. So if you have an emerging market index fund, for example, those are gonna take a hit in high interest rate times and inflation can also lead to market volatility.

And increased interest rates are always because there's increased inflation. So that can all lead to market volatility. So, What I want you to do is, the moral of this story is to ignore market volatility during these high inflation times. For example, there's been doom and gloom in the media for the last six to 12 months.

The s and p 500 is up something like 16 or 17% year to date. So ignoring what the media says, Ignoring all the noise and then just continuing your investment plan is what you need to do when it comes to investing in these high interest rate markets. Now, if you've never learned how to invest, we have a course called Index Fund Pro that teaches you step by step on exactly how to invest.

And so it's always linked up down in the show notes if you want to check that out. 'cause that'll show you exactly step by step-by-step how to invest. Number five is you need to fix that broke credit score. Do you have a credit score that needs a facelift? So if you have a credit score that needs a facelift, maybe it's time to give that credit score a FAS spa day.

So if you have a credit score below 700, then you need to make an adjustment to increase that credit score over time so that these. High interest rates do not impact you in the future. So lemme give you a bunch of examples why we've already talked about mortgages and how that can impact us in these high interest rate environments.

But let's look at another example. Say for example, with an auto loan. So you buy a $25,000 car with a term of 60 months. Which is way too long. A person with a credit score of seven 20 or higher make it an interest rate of something like 3.3%, whereas somebody with a credit score of 500 or below is gonna get an interest rate of 15%.

And so in that scenario is gonna get an interest rate of anywhere between 10 and 15%. So in that scenario, over the life of the loan, the person with the lower interest rate is gonna pay $7,000 less than the person with a higher interest rate would. Same thing goes for credit cards. Even if you get into.

Credit card interest rates, you should never have credit card debt. If you have credit card debt pants on fire emergency, we need to pay that off. We'll talk about that in a second. But if you carry a balance on your credit card of $5,000, someone with a high credit score may have an interest rate of 14%, while a person with a low credit score may have an interest rate of 24%.

The difference of just a $5,000 note on that would be $1,000 if you pay off the balance in two years. So this is something where your credit score matters, and it's gonna significantly reduce the amount of money that you pay over time. We've talked about this a number of different times, and the opportunity cost of your credit score.

And these interest rates is hundreds of thousands, if not millions of dollars depending on how you borrow and what your interest rates are. You need to make sure that you reduce this high interest debt. Then you got insurance premiums. Your insurance premiums can be lower if your interest rate is higher, and things like security deposits for utility companies or cell phone providers or even landlords can require a much higher security deposit.

If you have a low credit score. Having a low credit score hurts you financially in more ways than one, and for some reason. There's a lot of people out there who do not take their credit score seriously. You need to take it extremely seriously in order to make sure that you can keep as much money as possible.

So pay your bills on time is one thing you need to do. Reduce that credit utilization, meaning the amount of credit that you're using, make sure it is lower than 7%. That's what people with an 800 credit score on average keep their credit utilization at. Make sure you have a longer credit history between those three things that I just talked about.

Paying your bills on time, keeping your credit utilization low, and having your payment history, that's your 80 20 for your credit score. That is 80% of the battle right there between those three things. So making sure that you do those three things and really focus on those is going to be the biggest battle that you need to overcome a low credit score.

Then number six, it's time to lose the high interest debt weight. So getting rid of high interest debt is the same thing. It's very similar to losing those extra pounds that you gained on that Aruba vacation a couple of years ago. If you don't get rid of the weight, you may keep gaining weight causing more harm than good.

The same thing goes for your debt. Debt over time will compound against you if you don't lose that debt. Get rid of that debt. Tell debt to get a vest with a bunch of pockets in it. Grab a big old stick and take a hike 'cause you don't want it around anymore. So we're gonna need to get rid of debt as fast as we possibly can.

But the problem is, and this is something that is sickening to me, is that debt is rising every single month right now, in the first quarter of 2023. American's total credit card balance is $986 billion, and I've seen other reports say that it's even higher than a trillion dollars, $986 billion for high interest debt.

This is a very, very big problem, and here is the average credit card debt by age and generation, so Gen Z, which is people between age 18 and 26. The average credit card debt is $2,781. For millennials, it's 27 to 42. The average credit card debt is $5,898 for Gen X, 43 to 58. It just keeps rising. The average credit card debt is $8,266 for the baby boomer generation who's typically has more savings than all these other generations.

59 to 77, $7,464 in credit card debt. And then the silent generation has $5,649 on average from age 78 to 95. And the average account age for some of these is massive. So making sure that you get rid of some of this debt is gonna be imperative, and it looks like from the averages, a lot of people are carrying high interest credit card debt.

If that's you, if that's you, I want you to work on trying to pay down this debt. In fact, 43.4% of credit card users are actually revolvers people who are continually holding a balance from month to month on their credit cards. You do not want to do this, and I don't know where this myth came from, but carrying a balance on your credit card does not improve your credit score.

You need to pay that thing off. In full every single month. I don't know where that came from and where that rumor came from, but I see way too many people talking about that, saying If you carry a balance on your credit card, it'll improve your credit score. That is absolutely not true. Please do not do that.

So it doesn't matter what you're doing, if you do not get that credit card debt under control, it will start to eat away at your wealthbeing ability. And once you pay that credit card debt off, I want you to envision this for a second. Imagine your monthly credit card payment going towards your future self and towards your investments.

And once you start getting that credit card payment towards your investments, all of a sudden those investments start to compound over time and they're gonna create. Freedom for your life. If you just take control of this credit card debt, you could take those payments, put them towards your future, or put them towards things you actually value instead of paying off the old mistakes that you made.

It's so powerful to get rid of your credit card debt, and I'm so excited for you to do it. So if you are interested in getting rid of credit card debt, We have a free course for you@mastermoney.co slash debt course. We have that course free because I do not wanna ever charge anybody who is in debt to learn how to get outta debt.

It is one thing that we are so passionate about here at the Personal Finance Podcast. We want you out of debt because it is so freeing. Once you are. So if you wanna check that out, just go to master money.co/debt course and you can see that free debt course you can sign up there. It is less than an hour long, and you can get your entire plan on how to pay down your debt as fast as you possibly can.

Now listen, I hope you guys learned a ton about how to navigate these high interest rate environments. If you guys have any questions, please reach out to me on any of the socials at Master Money Co. And if you got value outta this episode, share it with a family member, a friend, or somebody else who can get value outta this episode.

And don't forget to subscribe. To the Master Money Newsletter. I don't talk about that enough. Here on the podcast, we are sharing a bunch of different insights on the Master Money newsletter that is going to allow you to grow your wealth over time. And you can read it in less than five minutes every single week.

And we have a bunch of news and articles and things like that that you can check out as well. And we also have a book club. On the Master Money Newsletter. So if you're looking for more books to read, readers are leaders. If you're looking for more books to read about personal finance, investing, personal growth, developing the right habits, building a business, all of those different things, we have a book club inside the Master Money Newsletter.

It is always linked up on the down the show notes, so make sure you check out the newsletter. Really, really excited for some of the content we have coming out there. Listen, thank you guys so much for listening to this episode and. Thank you for investing in yourself because every time you listen to this podcast, you are investing in yourself, which is the most valuable thing that you can do to increase your earning potential over time.

So I'm so incredibly excited to share some of this information with you guys, and I can't wait to see you on the next episode.