If there's one thing Americans are unfortunately good at, it's racking up debt, and new data from Northwestern Mutual further drives home this point. Specifically, the average level of personal debt, not including mortgages, climbed to $38,000 this year, which represents an almost $1,000 increase from 2017.

Here's another troubling statistic: A good 20% of Americans allocate anywhere from 50% to 100% of their income to repaying debt, while 13% are convinced they'll be in debt for the rest of their lives.

Woman sitting by a laptop and pile of papers covering her eyes


If the idea of being perpetually saddled with debt doesn't sit well with you, you should know that there are steps you can take to recover. And the sooner you do, the better you'll feel about your financial outlook on a whole.

1. Create a budget -- and stick to it

A big reason so many people wind up in debt is that they take on expenses they just can't afford. That's why it's so important to follow a budget. Without one, you'll have no idea where your money is going and how much you can afford to spend.

Creating a budget is easy, so if you don't have one already, take some time to review your various expense categories, determine how much you spend on each, and compare that total to your post-tax income. If you're maxing out each paycheck or, worse yet, spending more than what your paychecks allow for, you'll know where you have room to cut corners. And the sooner you start shaving some costs, the sooner you'll manage to free up money you can use to pay off your debt.

2. Set priorities

Every purchase you make comes at the expense of another. If you choose to pay $1,500 in rent instead of just $1,200 because it buys you a larger apartment, you may need to shrink your leisure spending to avoid going over your budget. But if you want to get out of debt, you'll need to learn to establish priorities so you're not spending every last penny you have.

Once you have your budget in place, take a look at your various expense categories and decide which ones are the most important to your quality of life. Maybe you hate being cramped at home, but are willing to drive an older car around town if it buys you the option to have more living space. The key is to put some thought into these choices to avoid overspending and eke out some savings.

3. Avoid impulse spending

It happens to the best of us: You go to the store intending to buy one thing, but you leave with a shopping cart full of products that caught your eye along the way. An estimated 84% of Americans regularly fall victim to impulse buys, but it's those unplanned purchases that can throw your budget out of whack and thwart your money-saving intentions. Not only that, but making impulse purchases also increases your chances of taking on more debt.

The solution? Force yourself to wait 24 hours before making unplanned purchases. Chances are, you'll come to realize during that time that most of the items you're tempted to buy aren't necessary or even all that desirable.

4. Have emergency savings

If you don't have money in the bank to cover life's unknowns, you'll generally have no choice but to resort to debt when unplanned bills land in your lap. That's why it's crucial to build emergency savings. Having that safety net will prevent you from digging yourself further into a hole when your car breaks down, your furnace dies, or your employer cuts your hours, leaving you with less income to work with.

Ideally, your emergency fund should contain enough money to cover three to six months' worth of living expenses, but if you're starting with nothing, save as much as you can and work your way up over time. Believe it or not, establishing your emergency fund should actually take priority over paying down existing debt, so look at your budget, eliminate some expenses, and use the money you free up to build some cash reserves.

5. Get a side hustle

If you're already in debt, or want to avoid it, having a secondary source of income can go a long way. Enter the side hustle. The good thing about taking on an additional gig is that the money it brings you won't already be factored into your budget. As such, you should have no problem saving it to build your emergency fund or using it to pay off the debt you've managed to rack up.

Having a side hustle is also a good way to avoid debt in the face of unemployment. If you lose your job, you'll have a second income stream to fall back on while you look for work, thereby reducing your need to borrow money to cover your expenses during that time.

Being in debt is no fun, but don't assume you'll be stuck there for life. If you take steps to be smarter about spending, saving, managing, and earning money, there's a good chance you'll succeed in not only paying off the debt you've accumulated, but also avoiding new debt.