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Key Debts to Pay Off

Core Facts

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Tuesday, October 6, 2020

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.

 

 

IMPORTANT DISCLOSURES

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

 

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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