Debt in America

Total household debt in the United States stands at $14.35 trillion as of September 30, 2020, according to the New York Federal Reserve’s Quarterly Report on Household Debt and Credit. Credit card debt accounts for $807 billion of that debt. The average credit card has a balance of $5,897.

Money is the leading cause of stress for most Americans. The constant worry of paying bills and avoiding debt can often evolve into actual physical ailments. But as overwhelming as it can seem, there are steps you can take to regain control of your finances and manage your debt.

Paying Off Debt

One of the first things you should do is figure out exactly how much debt you have and what interest rates you are paying. Write down how much you owe on things like your mortgage, car payment, college loans, and credit cards. Next to each item, list the name of the lender, the amount you owe, the term of the loan and the interest rate. Total up the amounts to determine your debt load. The number may overwhelm you, but you’ve just taken the first step to creating a debt management plan, so try to stay positive. Check out the Credit Calculators page of our website.

For mortgages, check to see if current rates are lower and refinance if possible. For credit cards, contact the company and see if you can negotiate a lower interest rate or payment plan that is more workable for your budget.

Most importantly, don’t stop making payments on any of the loans. By continuing to make even the minimum payments, you are protecting your credit score. If you have any extra funds, pay more than the minimum on the loan or credit card with the highest interest rate. This will help save you money in the long run.

Importance of Budgeting

Creating and maintaining a budget also becomes necessary when getting out of debt. Know how much money you’re making and how you are spending it. Some expenses are fixed and must be paid each month. Other expenses are flexible and can be reduced to help pay off loans and credit card balances. For example, go without cable TV for a few months or cut back on the number of times you eat out to save money. Also, avoid impulse shopping and make a point to not use your credit card unless absolutely necessary while paying off high balances. You don’t want to add to your existing debt by racking up charges. The Budgeting Worksheet is a great resource to help you start down the road of getting out of debt.

Credit Counseling

Finally, if you are unable to resolve your debt issues on your own, call a credit counseling firm. The National Foundation for Credit Counseling is a nonprofit agency that provides education and counseling to consumers. To find a location nearest you, call 1-800-388-2227.

Helpful Resources

Basics of Credit
Credit Calculators
Credit Reports and Scores