The average American is in debt $137,063. That’s astounding considering the average income is only $59,039 per year. Knowing these numbers, it is no wonder why so many people are defaulting and going into bankruptcy just 15 years out of college. Many Americans pay only their minimum balances and use their “extra” money for going out, such as to dinner and movies, and the other little pleasures life has to offer. But eventually it catches up and causes major issues. Here are a few things you can do to make paying off debt a priority and to set a reasonable time-frame for getting debt paid off.
Don’t Take On Any New Debts
Adding anything extra to your budget will hamper your ability to pay your debt down faster and on time. Instead of splurging on the new video game system or going on that daycation, money is better spent paying off some debt and doing things within a much more reasonable budget. Instead of going out to a fancy restaurant, buy some of your favorite foods from a bargain market and cook at home with your spouse. Instead of spending $100 or more each week on entertainment, find low-cost alternatives such as spending time outdoors or playing board games with family or friends. When you are already in debt, there is no need to go out and spend recklessly, especially on any major purchases.
Make a List of All Current Debts
Making a thorough list of all your outstanding debts that need to be paid off, no matter how large or small the loan is and regardless of who the loan is from, can help you create an appropriate strategy to paying off your debt by helping you visualize what you owe. You could be years away from paying everything off, or you could be only a few months away from complete financial freedom, but without making a list you will not understand exactly where you stand. Unfortunately, when interviewed, most Americans did not understand how large their current debt load is – and this is not only dangerous but is also the leading cause of bankruptcy in the United States.
Consider Renegotiating Interest Rates
Once you see the size and amount of debts you have, try to renegotiate your interest rates, if possible. This may allow you to spend less money on financing charges. You may redirect those payments into paying off your principal a little more quickly. Call your credit card company to see if they’ll offer you a lower rate. When you talk to your credit card company, you might mention that you’re current on your payments, and that you’re working diligently to continue your relationship with them and request a lower interest rate.
Choose a Debt Payoff Strategy
Attempting to pay off debts is no easy feat, that’s why it’s important to gather a game plan. There are many options available for debt repayment strategies, each with their own pros and cons. The key is to determine which debt repayment strategy will be most effective for your personal needs and habits and then sticking to the strategy you choose.