How to Lower the Average American's Personal Debt
Many Americans are overwhelmed with personal debt that comes from several sources. The debt may happen due to unexpected medical bills, educational expenses or from lack of fiscal discipline. In this economic environment, debt load grows overwhelming for many when the loss of jobs for one or both spouses has meant using credit cards to meet basic needs. With commitment and planning, the average American can lower personal debt.
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Instructions
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Take your financial temperature. This means looking at your total financial picture. Start with your income. List any and all sources you use to pay bills, other than loans or credit cards. You may have a regular and a part-time job. You may have regular interest payments or other income. Make sure you know what you have available each month.
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Subtract expenses from your income. Add up all usual monthly, quarterly and yearly expenses. These include insurance payments for the house and the car, taxes, medical visits, utilities and things you need on a regular basis such as food, clothing and fuel. If you have children, add in school and activity expenses.
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Add up all sources of debt. Add up how much you owe to credit card companies, loan companies, your Aunt Harriet and other personal loans. The total may surprise you. A big step in lowering your personal debt is recognizing that it may be out of control.
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Lower payments and expenses. As a family, discuss ways to lower expenses. Maybe you can eliminate eating out. Maybe you can sell one car or get out from a car loan by selling an expensive car and purchasing another, less expensive car. Consider how to stretch your food budget by eliminating empty calories of pop, chips, candy and desserts. Use cheaper cuts of meat and extend what you cook with pasta, rice, potatoes and beans. Get creative with basic staples instead of buying prepared foods.
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Talk to loan and credit card companies and negotiate better rates or repayment plans. If you cannot make a payment, don't let the situation rest. Call and explain. Try to pay something rather than ignoring the situation.
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Pledge not to use credit cards. Cut them up if you wish, but don't close the account as that reflects negatively on your credit rating. Make a budget that stays within your income and stick with it. No buying on impulse. No running out for a quick snack. Rein in spending impulses, focusing in on how good it will be once you are out of debt. Pay off debt as soon as possible, but make room to build up a $1,000 contingency fund for emergencies. This keeps you from pulling out that credit card and starting the cycle all over again.
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