In 2008, right before the big stock market crash, American’s had a total of $12.68 TRILLION in debt! That number seems hard to even comprehend. But, in the last 8 years we have steadily climbed back up into that same amount of debt. According to a report from the Federal Bank of New York, American’s household debt at the end of 2016 had reached $12.58 trillion. We are dangerously close to the same amount of debt eight years ago. If you are part of this static and feel you are swimming in debt, it is time to start digging out and prepare for the future, but hopefully not another crash.
Assess Your Debts
Before you can start paying down your debts you first have to be very aware of what debts you currently have. To help you get started, consider these steps:
- Know which debt has the highest balance, the highest interest rates, or smallest balance.
- Know how much your essential bills cost each month.
- Know how much money you bring in each month.
- Can you cut back spending to free up more money to pay toward debts?
- Allocate a certain amount of money each month to pay down your debts.
- Pay your debt down when you are paying your other bills.
- Once one debt is paid, roll that money into the next debt.
These seven steps will help you start digging out of debt. Just know you are not alone in this journey!
Feel The Power
Figure out what debt you want to pay off first and work to get it paid off. There is power in feeling that you are free from one debt. Once you feel that power, it makes it easier and more desirable to keep paying off other debts. Sacrificing something unnecessary today in order to pay off another debt is so worth that freedom. Choose the smallest debt and see how quickly you can pay it off. Don’t allocate so much money to paying off debts that you get further in debt another way making ends meet.
Stop Spending and Start Saving
To get out of debt, stop spending money on credit. It isn’t free money. It has to be paid back, and paid back at an expensive interest rate. Open a savings account and see if there is any way you can start depositing money into a savings account. The best banks offer automatic withdrawals from a checking account to a savings account. Even if it is only $10, it will get you in the habit of saving money. When you have more, increase the amount being saved. Be so careful about how you spend your money to ensure there is enough to pay back debts and deposit some into savings.
Having some debt, like a mortgage or a reasonable car loan is fine. Assess your situation to see if you are too much a part of the trillions of dollars American’s are in debt. If you are, work to free yourself from that static and the reign of debt!