Debt can be a major drag. Here’s how to tackle yours.
- A new survey reveals consumer debt is a problem for many Americans.
- Here are some tips for tackling your debt and paying it off more efficiently.
Americans, generally speaking, aren’t strangers to consumer debt. But that doesn’t mean they’re not stressed about it. In a recent New York Life survey, 29% of Americans who feel less confident in their finances than before are facing challenges with managing debt. If that sounds like you, here are three essential moves to make.
1. Recognize the difference between healthy debt and bad debt
You may have a mix of debts in your name, and it’s important to know which ones you ought to try eliminating first. Mortgage debt is considered a healthy type to have. A mortgage allows you to eventually own a home outright, and that home could gain or maintain its value over time.
An auto loan is also a pretty healthy type of debt. While cars don’t usually gain value over time, they’re an essential asset, and they are worth some money even as they age. Plus, auto loans, like mortgages, tend to come with fixed monthly payments.
Credit card debt, on the other hand, is generally bad news. Not only do credit cards charge a lot of interest, but they often charge variable interest, making it difficult to predict your true carrying cost.
The expenses you charge on a credit card may be just that — expenses, as opposed to assets that are worth a meaningful amount of money. You don’t necessarily have to worry about paying off your mortgage or car loan as quickly as possible — but you should aim to knock out your credit card balances as soon as you can.
2. Rework your spending to free up money for unhealthy debt
If you want to pay off your credit cards sooner, cutting back on non-essential spending should help free up cash you can use to whittle down your balances. Take a look at your budget, or set one up if you don’t have one yet, and figure out how much savings you can eke out by reducing your spending in categories like entertainment and dining out. You may even be able to slash your spending on essentials like groceries and household products if you start seeking out sales and …….