by Maurie Backman | Published on Sept. 22, 2021
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Worried you'll never shake your debt? Here's what to do.
Americans clearly aren't strangers to debt, as evidenced by the fact that U.S. consumers aged 18 and up owe an average of $23,325 outside of their mortgages, according to Northwestern Mutual's 2021 Planning & Progress Study. Not surprisingly, that debt is holding a lot of people back from meeting 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 those in debt only expect to carry it for one to five years. But 14% think it'll take 11 to 20 years to pay off their debt. And most depressingly, 9% expect to be in debt for the rest of their lives.
If you fall into the latter category, you shouldn't just resign yourself to perpetual debt. Instead, take these key steps to whittle down your debt sooner.
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If you owe money on your credit cards, you may be racking up hoards of interest by the day, thereby digging yourself further into a hole. If that's the case, lowering the interest rate on your debt could make it much easier to pay off.
One option in that regard is to do a balance transfer, where you move your debts onto a new credit card that charges a lower interest rate than what you're currently paying. Another option is to take out a personal loan, use it to pay off your credit cards, and then repay that loan at what should be a lower interest rate.
If you own a home, you can also look at doing a cash-out refinance, where you borrow more than your remaining mortgage balance and use the extra money you get to pay off your debt. These days, refinance rates are sitting near record lows, so you might really slash the interest rate on your debt by going this route.
You'll often hear that cutting small daily expenses can go a long way toward helping you meet financial goals, like being debt-free. While it's true that every little bit helps, if you don't want to spend the next several decades of life deep in debt, you may need to make bigger changes.
See about cutting one major expense, whether it's giving up a car (if that's possible where you live) or downsizing to a smaller home (again, if that's feasible). Doing so could free up hundreds of dollars each month for debt payoff purposes.
The more money you earn, the more cash you'll have available to chip away at your debt. It pays to find a side hustle you can do on a long-term basis. That could mean driving for a ride-hailing 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 steady so you can continuously bring in extra income to chip away at your debt.
You may come into extra money from time to time, whether it's a tax refund or a bonus at work. Resist the urge to spend that cash and use it to pay off chunks of your debt instead.
If you're staring at a heaping pile of loans, you might think you'll never manage to shed it in your lifetime. But some savvy moves on your part could leave you debt-free within a few years.
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