Are you feeling overwhelmed by student loans or credit card debt? If so, you’re not alone. Consumers of all ages are carrying debt and it’s hampering people’s ability to reach certain financial goals such as buying a home and saving for retirement. Whether you’re just starting out in the workforce or a career veteran, learning how to reduce your debt can help you take control of your finances.
Who has debt?
The majority of Americans have debt. The total average debt owed by U.S. households as of September 2017 was more than $131,000.* The amount and type of debt varies with credit cards topping the list, followed by mortgages, auto loans and student loans.
People between the ages of 35 to 44 typically carry the highest amount of debt, as a result of spending on mortgages and student loans. Debt eases for those between the ages of 45-54 thanks to higher salaries.
For those between the ages of 55 to 64, their assets may outweigh their debt. However, many still owe more than they have saved and must delay retirement as a result.
A two-pronged approach
There’s no magic bullet — you have to tackle the basics: curb spending and boost savings to improve your financial outlook.
Prioritize paying off your debt.
Attack those balances on high-interest credit cards and other loans to free up funds for savings and other expenses.
Talk to your creditors about renegotiating payment terms. Ask your health care provider to set up a payment plan instead of charging medical bills to your credit card. Look into opening a health savings account (HSA) through your employer.
Take a hard look at spending habits.
Rein in nonessential spending by avoiding the mall, eating in more and dining out less, canceling subscriptions and cutting down on entertainment expenses. Enjoy a game or movie night at home with friends. Barter for services such as baby-sitting or home improvement projects.
Increase your income.
Consider working part-time or picking up freelance gigs to boost your bottom line. Sell items you don’t use and put the money right into savings.
Set up an emergency savings account.
Aim to keep three to six months’ worth of living expenses. By doing this, you won’t have to rely on credit cards to pay for unexpected expenses like a car repair or medical bill.