We are a nation drowning in debt. According to a recent NerdWallet survey, the average U.S. household carries $130,922 in total debt, including student loans, automobile payments, mortgage debt and an incredible $15,762 in outstanding credit card debt.
While it would be easy to pin our excessive debt on reckless spending, can this completely explain the source of our crushing debt loads?
According to NerdWallet, we’re increasingly being forced to finance the daily cost of living with debt. For instance, the total cost of living has increased by 29 percent since 2003; this includes increases in food, housing, education and medical care costs. Yet, income has grown only by 26 percent in that same time period. Our wages have simply not kept up with the increasing costs of living.
So what can you do to tame the debt monster?
Ruthlessly tackle your most expensive debts, which are usually related to transportation, housing and credit cards.
Re-examine your transportation needs
According to a recent report from Experian Automotive, monthly automobile loan payments have reached an all-time high with the average American shelling out nearly $493 a month for their new vehicle. With a two-car family, the payments are twice as high.
To achieve financial stability, sometimes you must take extraordinary measures. Consider if your family really needs two cars. With insurance, maintenance and fuel costs added to the monthly car payment, you quickly see why the American Automobile Association estimates that the average person spends $9,641 per year to drive. Becoming a one car family could provide you with the financial boost that you need. The nearly $9,000 in yearly savings could go a long way to eliminate debt, build an emergency fund or save for retirement.
Take a closer look at your living situation
Could you refinance your mortgage to obtain a lower interest rate? For many couples, this is a great way to start saving a few hundred dollars each and every month.
Perhaps you are paying for more home than you can afford. Remember, your mortgage payment is just one part of the home ownership equation. Financial experts estimate that home ownership will set you back an additional 40 to 45 percent above mortgage costs as a result of utilities, maintenance, property taxes, home owners insurance and other expenses. Sometimes downsizing will not only reduce your mortgage but also reduce your associated home ownership expenses as well.
Aggressively tackle your high interest credit card debt
According to the NerdWallet, the average home with credit card debt owes $15,762 on their cards, which in turn costs them nearly $2,630 per year in interest charges. This is money that is simply being thrown out the window.
The first step to eliminating credit card debt is actually sitting down and calculating how much credit card debt you owe. Next, get serious about purging this parasitic debt from your life. Clean out your closets, basement and garage by selling your excess junk. CraigsList, Ebay, Amazon and even an old fashion garage sale or consignment shop are great avenues for raising money to pay down credit card debt.
Afterward, scrutinize all your bills to see how you can save money. Could you get a better deal on your cell phone plan or find a lower deal on your car insurance? Apply all the savings to your debt.
Finally, determine what financial fat you can your cut from your budget to help pay off your credit card debt. Consider eating out a couple times less per week. Eliminate your extra cable channels or visit the hair dresser one time less a month.
By developing a plan to tackle your debt, you can guarantee that you won’t suffer the fate of millions of Americans struggling to make ends meet.
BMWK, how much debt do you owe?