I’m an MSer and a debt-oholic

Not unlike so many Americans, we battle debt but having a chronic illness in a country that does not have universal healthcare means that we are responsible for the slack on our own.

And all those costs like co-pays and coinsurance and medical equipment and incontinence supplies fall largely to us. 

How I became addicted to debt

When I was in college the credit card companies were eager to get us to sign up for a card. In our own name. How could I not? Now I recognize that as the seduction of a drug dealer. Just a little taste and then they got you.

Ever after, for the most part, I carried a balance and paid the interest on my credit card. I figured it was a small price to pay for the privilege.

I was convinced that, within reason, I could charge what I wanted when I wanted it and pay it off in installments.

What I should have done

First, amass and save a cushion, a small emergency fund, maybe $1500 in current times. Then keep empty credit cards in case of emergency, like the water main breaks or the heater goes out. I like this idea better than accruing a large emergency fund.

But another good place to stash additional emergency funds might be in your Roth 401k. Although it is a retirement account, you could take back out little chunks up to the total amount of your contributions only, not any earnings, at any time with no penalty! I guess it depends on how you define ’emergency’.

***Not sure if this is true anymore. Please check the current tax laws before you do anything drastic!***

If you do need to use the cards, you must pay them back down to 0 again as soon as you can. That needs to go on the top of your priority list.

The plan in a nutshell

1. Have one or two cards in your own name with zero balances that you can use as security when renting a car or getting a hotel room, but don’t use them to pay with! You are just showing vendors that you are good for it, that they can trust you. 
   
2. If you must use a card, pay off the entire balance at the end of the month, ideally before any interest has been applied, but definitely as invoiced. 
   
3. If you must carry a balance on the card, strive to pay it down quickly. And keep your eyes out for transfer offers that make sense for you.

4. If you owe multiple loans and/or credit cards, note the interest rates of each and pay as much over the minimum payment as you can on the highest. Also I think you should never pay just the minimum on anything you owe.

When you pay even $1 over the minimum, it goes entirely towards just the balance, so if the agreement of your loan is that you are being assessed interest on whatever your current balance is, you can reduce the underlying balance this way: by paying extra over the minimum on all debts, even if it is as little as pennies! And as you pay one card off, you can add that payment amount to the payment amounts of the next one, and so on.

These days this doesn’t happen automatically, so make sure. When I switched mortgage companies they applied my payment overage to my escrow account for possible insurance hikes. Uh, no!

Also, make sure there is no prepayment penalty that a lender wants to charge you for paying off the loan early. Hello? It’s your money! Not sure when that idea started, but it is definitely not consumer-friendly!

Opinions expressed are my own.

RELATED STUFF

• Podcast Take Back Your Finances
• Financial Planning section | The National MS Society
• Website Mint by Intuit