Americans certainly aren't shy about borrowing money, whether it's to purchase a home, buy a car, pay for college, or indulge in the things that make us happy. But as is the case with so many things in life, borrowing should be done in moderation. These days, however, a growing number of consumers are getting in way over their heads. According to a recent report from Northwestern Mutual, 45% of borrowers are spending up to half of their monthly income to repay the debts they owe. And that's just a recipe for disaster

When debt spirals out of control

Nearly 75% of the U.S. population is drowning in debt, but some folks clearly have it worse than others. Northwestern Mutual found that 47% of Americans are least $25,000 in debt, and the average debt among U.S. adults excluding mortgage-related obligations is an almost ridiculous $37,000. Even more appalling is the fact that over 10% of borrowers owe upward of $100,000.

A couple sits at a table, reviewing their pile of bills and looking stressed.


To add a dose of insult to injury, for most people, excessive debt isn't a short-term problem. In fact, 36% of adults think they'll be in debt anywhere from six to 20 years, while 14% expect to remain in debt for the rest of their lives. But while some folks might feel they have no choice but to accept their debt as a way of life, those looking to break free from the cycle have more options than they might realize.

The impact of extreme debt

First, let's get one thing out of the way. There's a difference between the good kind of debt, like mortgage debt, and the bad kind, like credit card debt. While the former is a responsible way to finance a home, the latter often results from too much temptation and too little savings.

Consider this: Nearly 70% of Americans have less than $1,000 in the bank, and 34% have none at all. When savings fall short and emergencies strike, the end result is often an unhealthy reliance on credit cards to pick up the pieces.

But while some folks might manage to shrug off that debt, or chalk it up to unfortunate financial circumstances, others find it far more bothersome. In fact, 40% of those in debt agree that it not only substantially impacts their financial security, but serves as a significant source of anxiety. And while 35% of borrowers claim they pay as much as they can each month to get out of debt, 17% admit that they rarely do better than making their minimum payments.

Now if you're among those who are spending close to half their monthly income on debt payments, you should know that this pattern just isn't sustainable in the long run. Not only will it impede your ability to save for retirement (or even emergencies), but it'll leave you in a perpetual state of credit card dependency, which will further exacerbate the problem.

Of course, getting out of debt isn't something most folks can do overnight, but it is an attainable goal if you put your mind to it. You may just need a little guidance -- and a willingness to make some sacrifices along the way.

Breaking free from the cycle

To get out of debt, you'll need two things -- a strategic approach, and the money to support it. To accomplish the latter, you may need to make some lifestyle changes that work to free up cash. If you don't already have a budget, draw one up, identify the spending categories with the most flexibility, and start cutting back in each one. While you can't change your rent or car payment, you can cut out cable, eliminate restaurant meals, and curb all non-essential clothing purchases for the time being.

If these small changes don't amount to much, then you may need to make greater compromises to get your hands on more money. This could mean working extra shifts at your current job, getting a side gig, or downsizing your living space and moving someplace considerably cheaper.

Once you've identified some options for coming up with that chunk of money, you'll need a plan of attack. The best way to start is to review your bad debts (meaning, anything that's not a mortgage, student loan, or car payment) and figure out which ones carry the highest interest charges. From there, you can start by paying off the debts that are costing you the most, and work your way downward.

Another option is to see if you're eligible for a balance-transfer credit card with a generous 0% introductory APR, and move your existing debts over to a single card with a lower interest rate overall. This will offer some much-needed relief from the high interest charges you're currently paying.

Another option, if you're a property owner, is to see if you're eligible for a home equity loan, and use it to pay off some of your existing credit card balances. While you will be trading one type of debt for another, you'll probably pay something in the ballpark of half the interest. And, if you itemize on your taxes, you can deduct your home equity loan interest, thus saving yourself even more money.

Finally, it never hurts to try negotiating with your lenders for a better rate. If you owe a large chunk of money on a given credit card but have a solid history of making your minimum payments, your issuer might be willing to come down a notch.

No matter what steps you take to break free from the seemingly never-ending cycle of debt, the key is to do something rather than resign yourself to a lifetime of financial instability. It won't be easy, but the upside will be well worth the sacrifice.