Financial well-being starts by managing your debt

July 01, 2023

5 steps to ease your financial burden

With the rising cost of living, it’s not surprising that debt weighs heavily on many Americans. In fact, in November 2021, the total consumer debt hit $15.84 trillion, with the average consumer debt sitting at about $92,7211. While everyone’s circumstances are different, the good news is that there are steps you can take to create a debt repayment plan to ease your financial burden.

Assess where you’re starting from: Begin with a clear look of your total financial picture, including your income, lifestyle, non-debt-related expenses, and debt. When listing out your debt expenses, take note of remaining balances, interest rates, and minimum payments. Bottom line: every month, figure out how much money you have coming in and going out.

Consider the best repayment strategy: You can tackle paying off the smallest debts first, then your larger debts. This is referred to as the snowball method. Another option is to tackle the highest interest rate first, which is known as the avalanche method. In both cases, you continue making the minimum payment on other debts. Whether you focus on the smallest debt or highest interest rate, consider how much more you can contribute over that minimum payment, and when paying extra will serve you best.

Work with a credit counselor or financial advisor: If you find yourself overwhelmed, working with a credit counselor or financial advisor might be a great choice. Check your employee assistance program to see what financial advising benefits are available to you. You can also connect with your bank or credit union to find out what they offer. Another option is to learn more about nonprofit financial counseling organizations or community services near you.

Consolidate or refinance your debt: If you have debt in a lot of different places, consolidating or refinancing your debt might be your best option. When you carefully choose your consolidation option, you can make more progress toward paying off your debt, faster. Work with a financial advisor to discuss your options, as they may be able to help you identify solutions that you aren’t already aware of.

Track your debt repayment and spending: Keep your debt management goals top-of-mind. Tracking your spending will also give you real-time information about your habits. When you keep track of the two together, it puts you in a better position to manage your debt and contribute toward savings.

Regardless of the kind of debt or how much, plan to pay it down and reduce your financial stress, which will save money in the long run. While you’re working on your debt repayment, protect yourself from future debt by only buying what you can pay for without using credit.

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Sources:

• Consumer Debt Statistics in the U.S., MyCreditSummit.com
• Creating Your Own DIY Debt Management Plan, MoneyManagement.org
• 7 steps to more effectively manage and reduce your debt, Tiaa.org
• Debt Help Advice, Debt.org