COLORADO SPRINGS — Many families are struggling to pay off credit card debt right now. Data from the Federal Reserve shows Americans are more than $17 trillion in debt. It also reveals eight in ten people have less cash in reserve than they did before the pandemic.
News5 spoke with a local wealth advisor, to learn more about how to fix your finances and invest in a better future.
Larry Dozier is the Vice President of Integrity Wealth Advisors in northern Colorado Springs, a financial institution which helps people manage money and do financial planning. He said debt comes from people who are spending more than what they make.
“There are 64 million Americans in debt today, and it's it's not uncommon for people to have high credit card debt,” said Dozier.
Dozier said the average annual income for a household in the city is around $94,000 dollars. On average, that household spends about $7,300 a month or $88,000 dollars a year.
“There is a very small buffer between those numbers. When you have such a small number between your monthly expenses and your household income, a credit card, car trouble, anything like that can set you over then you get yourself in trouble very, very quickly,” said Dozier.
That's why Dozier encourages people to create a budget and track expenses, and lay out those expenses on a spreadsheet on a computer. He said it helps people to know what your money is being spent on, on a monthly basis.
“I believe in putting it in writing,” said Dozier. “I believe naming every dollar like you’d name your kids, where you would know exactly what you're spending each and every month, January through December.”
Expenses he recommends to budget for and keep track of include things like rent, cable, utilizes, car payment and car insurance, cell phone, credit cards, spending money and savings.
Dozier recommends a budgeting strategy created by Dave Ramsey. The goal is to pay off debts from smallest to largest, regardless of interest rate.
“Use that snowball effect that Dave Ramsey talks about, paying off that smaller bill first and then working your way towards the larger bills using that snowball effect,” said Dozier.
Using this method, Dozier said he has helped many put themselves in a better financial situation.
“It’s really important to keep a handle on your debt. You don’t want it to consume you,” said Dozier. “There is a way out of debt and credit card debt. It may take time, but if you have the right tools, you will succeed.”
Dozier said Ramsey’s budgeting strategy also recommends your housing costs being less than 33% of your annual income and transportation being less than 16%.
Dozier recommends saving $1,000 dollars in case of emergencies. Once you have that, he suggests contributing to a retirement fund like a 401k, Roth IRA or traditional IRA.
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