9% of consumers think they will be in debt for the rest of their life
Americans are clearly no strangers to debt, as evidenced by the fact that American consumers aged 18 and over owe an average of $ 23,325 off their mortgage, according to Northwestern Mutual’s 2021 Planning & Progress study. Unsurprisingly, this debt keeps many people from reaching big goals, with 29% delaying major purchases, 18% putting their retirement savings on hold, and 14% having to wait to buy a home.
The good news is that 45% of people with debt expect to wear it for only one to five years. But 14% think it will take 11 to 20 years to pay off their debt. Most depressing, 9% expect to be in debt for the rest of their life.
If you fall into the latter category, you should not resign yourself to going into debt forever. Instead, take these key steps to reduce your debt sooner.
1. Make your debt cheaper
If you owe money on your credit cards, you risk accumulating interest overnight, thereby digging yourself a little deeper into a hole. If so, lowering the interest rate on your debt may make it easier to repay it.
One option in this regard is to do a balance transfer, where you transfer your debts to a new credit card that charges a lower interest rate than what you are currently paying. Another option is to take out a personal loan, use it to pay off your credit cards, and then pay off that loan at an interest rate that should be lower.
If you are a homeowner, you may also want to consider a cash refinance, where you borrow more than your mortgage balance and use the extra money you get to pay off your debt. Refinancing rates are near record lows these days, so you could really lower the interest rate on your debt by going this route.
2. Reduce a major expense in your budget
You will often hear that cutting back on small daily expenses can go a long way in helping you reach your financial goals, such as being debt free. While it’s true that every little bit counts, if you don’t want to spend the next few decades of your life in debt, you may need to make bigger changes.
Consider cutting back on a major expense, whether that’s ditching a car (if that’s possible where you live) or moving to a smaller house (again, if that’s feasible). This could free up hundreds of dollars each month for debt repayment purposes.
3. Increase your income with regular sideline activity
The more money you earn, the more money you will have to reduce your debt. It is worth finding a side activity that you can do for the long haul. This could mean driving for a rideshare service or finding a gig you can perform from home. Or, you may decide to work a few evenings a week at a local business. The key is to find something stable so that you can continually generate additional income to reduce your debt.
4. Be smart with deals
You may get extra money from time to time, whether it’s a tax refund or a work premium. Resist the urge to spend that money and instead use it to pay off some of your debt.
If you are faced with a bunch of loans, you might think that you will never be able to get rid of them in your lifetime. But certain wise actions on your part could free you from your debts in a few years.
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