Crawling Out of the Consumer Debt Trap
The average American currently carries between $10,000 and $15,000 in consumer debt, and this includes credit cards, store cards, auto loans, personal loans and any other amounts owing that don’t include mortgage payments. If only the minimum required payment is made on debt of this amount, it would take a whopping 13.5 years to repay it in full – and this is if no additional debt is accrued during this time.
Regardless of the type of debt you’re carrying, there are steps you can take that will help you get out of the consumer debt trap once and for all.
Pay More than Minimum Required Installments
One of the best ways to eliminate consumer debt as quickly as possible is to pay more than the required minimum balances on any outstanding amounts. This will not only reduce the amount of time you’ll need to pay a bill in full; you will also save a significant amount of interest while repaying your debt.
Consider Using the Debt Snowball Method
This process involves paying as much as you can on your smallest consumer debt, while ensuring that minimum repayments are still being met on the others that still need to be repaid.
Start by listing all of the consumer debts you’re currently carrying, from the smallest amount owing up to the largest. Do everything you can to pay as much as possible off on your smallest debt each month. Once the smallest debt has been fully repaid, take the amount you were paying towards it and include it on the minimum amount you were paying on the next smallest outstanding debt.
An alternative approach here can be to get the debts with the highest interest rates paid first – this will help save a lot of money over the long term.
Stick to a Tight Budget
After deciding that you want to eliminate your consumer debt, you’ll need to examine your budget carefully – if you don’t have a budget outlined, now is the time to address this issue.
Start by collecting bank account statements and carefully check each line item – this will allow you to see how your hard-earned cash is being spent each month. While those drive-through coffees and $10 lunches may not seem like a lot of money, they quickly add up, especially if it becomes a regular habit to indulge in them.
Subscriptions to the fastest internet packages (slower options usually get the job done just as effectively but for a fraction of the price), online streaming, club memberships, monthly box deliveries and any other recurring expenses that aren’t genuine essentials should be eliminated from your budget until your debt is fully repaid.
Once your debts have been paid in full, you’ll be able to re-examine your budget to determine how much money can be set aside for discretionary expenses.
Although you may think that you’ll be depriving your family of the ‘nice to haves’ while you’re dealing with your outstanding consumer debt, the truth is that your whole family will enjoy far greater peace of mind in knowing that you’ll now be able to start saving for a rainy day instead of stressing about trying to make ends meet each month.