Key Debts to Pay Off
If you’re one of the few Americans who are completely debt-free, then read no further. The truth of the matter is that most Americans carry at least some debt. According to Experian’s 2019 Consumer Debt Study, total consumer debt in the U.S. is at $14.1 trillion, with Americans carrying an average personal debt of $90,460. Generationally speaking, the highest carriers of debt are GenXers, with an average of over $135,000 in debt, followed by Baby Boomers with almost $100,000 on average, and Millennials in tow, with close to $80,000.
The average American household has thousands of dollars in credit card debt. They also have thousands in student loan debt and thousands more in auto loans, mortgage loans, etc. As one grows older, it is important to consider your financial well-being and take a look at prioritizing which debts to focus on before you pack up the briefcase one last time and journey off into retirement land.
Housing is the major component of debt for families with a head age 55 or older. Those with housing debt have obvious and serious implications for their future retirement security. Of these Americans, perhaps it is most significant that their families are potentially at risk of losing what is typically their most important asset—their home. One way to shave down your mortgage is to apply extra money toward the principal.
Higher education is costly, and it is also one major source of American debt. In recent years, almost three-quarters of students graduating college were saddled with an average debt of over $25,000 each. Student loans can be financed whereas your retirement on the other hand cannot.
If you’ve taken on the responsibility of paying for your child’s education, start repaying loans as soon as they come due, make more than the minimum payment, and as soon as your child gets a job after graduation, have them contribute a certain amount each month to paying down the loan.
Unsecured debt is a large factor as well. If you have $10,000 on a credit card with 12 percent interest, for example, it’s going to take more than nine years to pay it off if you're only making $150 payments, and you'd pay over $6,500 in interest.
It would be wise to look over your highest-interest debt and consolidate if possible. Some companies offer zero percent interest for 12 months on a balance transfer.
Eliminating debt doesn’t necessarily mean you have to make sacrifices, it just means you need to change your habits and follow a smart strategy. So sit down, go through your budget, and figure out where you can trim the fat, and get on the road to becoming debt-free.
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