Americans are drowning in debt to the tune of over $66,000 per adult. Interest rates on credit cards, car loans, and student loans are rising adding to the expense of debt over time while many families are caught in a vicious cycle of charging basic needs when they’re short on cash which creates higher balances and bigger interest payments. Paying down debt, even debt that you feel is unsurmountable, is possible but takes strategy and will power.
Keep in mind, not all debt is bad. A mortgage on a home and a personal loan to pay off high-interest rate credit cards are two examples of good debt. To get out from under bad debt you must first reduce the amount of money you spend on nonessentials. The cost of monthly subscriptions, dinners out, and impulse shopping can really add up, but it will take will power for you to reduce spending on things you love to focus only on what you need. Speaking of, next you should list your essentials spending including housing, food, utilities, healthcare, etc. Then use the Debt Worksheet available on our website to log creditors, interest, minimum monthly payment, monthly due date, targeted payoff date, and actual payoff date.
We also have a Budget Worksheet available for download that will help you track everything from parking tolls to prescriptions and everything in between. Once you know exactly how much debt you have and what interest rates you’re dealing with, vs your income after taxes and current monthly spending, you’ll be better equipped to design a strategy to reduce unnecessary spending to pay down debt more quickly.
If you’re in need of a financial life preserver one of our Alloy Wealth team members can help you prioritize payments and establish a spending plan. We can also assist with estate planning, tax planning, and retirement planning. Call 800-689-3935 to speak with one of our experts and, in the meantime, talk to your banker about a low interest loan to pay off high-interest credit cards, consider a credit card balance transfer to a zero-interest card, and pay with cash to avoid charging on credit cards.