Americans are being crushed under an ever-growing mound of debt. According to a report from NerdWallet, American households have a total debt of $13.21 trillion. The debt can come in many forms, from credit cards to mortgages, but the result is the same: many Americans are struggling to get ahead.
Credit Card Debt
There’s a right way and a wrong way to use credit cards. The right way involves taking advantage of rewards without carrying a big balance. The wrong way means piling up more debt every month and getting stuck with high interest charges.
Unfortunately, many people are doing it the second way. It’s not always the result of a lavish lifestyle, either. Some families rack up credit card debt trying to pay for necessities like food and surprise medical bills.
According to NerdWallet, American households with credit card debt owe an average of $15,432 and pay $904 in interest alone each year.
According to CareerBuilder, 78 percent of U.S. workers are living paycheck to paycheck. This means that many Americans lack the savings needed to cover even small emergencies, like emergency dental work or car repairs.
When emergencies arise, a payday loan can seem like a lifesaver. Unfortunately, as this article from Money Under 30 explains, people who take out these short-term loans often have trouble repaying them, and they end up stuck in a debt cycle with incredibly high interest rates.
The Pew Charitable Trusts found that the average payday loan borrower is in debt for five months, paying $520 in fees to borrow $375.
Auto Loans and Mortgages
Most people need to take out a loan to finance a car or house. However, if the loan payments are more than a person can afford, this can still lead to financial problems. In some cases, families may even have their cars repossessed or their homes foreclosed.
After the financial crisis of 2008, foreclosure rates skyrocketed to a peak of nearly 1.6 million in February 2011, according to Forbes. Although the housing market has improved since then, foreclosure remains a serious threat.
Student Loan Debt
As tuition costs rise, many students and their families turn to student loans. While this can seem like a good investment in one’s future, the resulting debt can also become a burden as graduates try to start families and buy homes.
According to Student Loan Hero, people who graduated college in 2017 owe an average of $39,400 in student loan debt, an increase of 6 percent compared to 2016. Not everyone who takes out a loan will be able to repay it, either. The student loan delinquency rate is 11.2 percent.
Paying Off Debt
If you’re in debt, you understand the importance of getting out of debt.
- Decrease your expenses. Spending less means you’ll have more money to make extra payments, helping you get out of debt faster. Take a good look at your budget and identify any costs you can eliminate or reduce.
- Create a strategy. This could involve paying off the debt with the highest interest rates first. It could also include debt consolidation.
Do you need help getting out from under debt? We can help you achieve your goals of financial freedom and debt elimination. Contact us today.