3 Reasons you’re broke — the motley fool national gas average 2012

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Let’s say you owed $16,048 at 15% interest with a minimum payment equal to interest plus 1% of the balance. Your minimum payment would start at around $361 monthly. And, if you paid only the minimum, you’d pay $19,539 in interest, and it would take you 382 months — 31 years — to become debt free.

When you carry a credit card balance, every purchase costs more because of interest. Don’t make your everyday purchases more expensive. Instead, buy only things you can afford to pay for when your credit card bill comes due. Living on a budget and saving for big purchases makes that possible.

If you’re already in debt, get serious about getting out. Consider a consolidation loan to reduce your interest rate so repayment becomes more affordable. And, make extra payments by reducing spending or taking on a side hustle. If you pay $800 monthly instead of the minimum, a $16,048 balance could be paid off in just two years, and you’d save almost $17,000 in interest. 2. Paying an expensive car loan

Americans are taking longer loans, buying costlier vehicles, and making higher monthly payments than at any time in history. In fact, the average monthly payment for a new car reached a record $515, and the average monthly payment for a used car hit a new high of $371 in 2017, according to data from Experian.

If you’re paying $515 monthly for a car that loses value every day, that’s $6,180 per year you can’t use to max out an IRA or put money into an emergency fund. And, most people have a car loan for all but around six years of their working life, because they get new vehicles shortly after their loans are repaid.

Keep making "car payments" once your loan is paid off, and pay for your next car in cash. Then, rinse, and repeat — drive your paid-for car into the ground, and save payments for your next vehicle. You’ll have enough for a new car long before it’s time to stop driving your old one, and can put the rest of the "payments" into retirement savings or toward accomplishing other financial goals.

Alternatively, if you live somewhere walkable, get rid of the car altogether and use a rideshare service or a rental when you need a vehicle. Or, if you’re a two-car household, see if you can work out a way to share just one vehicle. You’ll save on car payments, maintenance, gas, and insurance.

If you live in a high cost of living area, staying below the 30% limit can be really difficult. You may need to resort to creative approaches, such as getting a roommate or listing your home on Airbnb. Don’t rule out moving as an option, especially if your employer is open to a telecommuting arrangement, as there are plenty of affordable locales that are great places to live.

If you don’t live in an expensive area, housing costs still may be too high if you’ve opted for a big house or luxury apartment. Under these circumstances, ask yourself if your costly abode is really worth the financial struggle. And don’t forget: Bigger and costlier housing comes with costs beyond just the mortgage, including higher property taxes and maintenance expenditures.

If you don’t want to move, consider whether a side hustle could bring your income up enough that you can meet the 30% threshold. Otherwise, more careful budgeting and sacrifices in other areas of life — such as eating out less and spending less on entertainment — might be necessary to afford your expensive house. Tackling the big stuff can help you to improve your financial life

The reality is, a cheaper car will still get you where you need to go, sacrificing for a short time to pay off debt will allow you to enjoy life more later on, and cutting housing costs means you’ll have fewer money worries, so you’ll sleep more soundly under a smaller roof.