Do you feel overwhelmed by debt? Do you fear you’ll never get out of debt? You’re not alone. Many Americans struggle with debt. The latest Fed data shows that consumer credit card balances rose to $800 billion in the third quarter of 2021. That’s a $17 billion increase from $787 billion in the second quarter of 2021. The average credit card debt amount in West Virginia is $5,928.

Lesson 1 introduced the 50/30/20 framework. The idea is 20% of your income should be going towards savings and debt. This can be a struggle with high-interest rates seeming to make it impossible to make any sort of meaningful dent. There are methods to make repayment more manageable.

  1. Debt Snowball: focus on the smallest debt amount first while still making minimum payments on everything else. You’ll make extra payments on the one debt. When that one is paid off you’ll add the extra money to another debt. 
  2. Debt Avalanche: Make extra payments on the debt with the highest interest rate while still making minimum payments on everything else. Once the highest is paid off you’ll add the extra money to the next highest interest rate. 
  3. Debt Consolidation: This may be via a balance transfer card or a loan, but you’d combine multiple debts into one. The idea is to try and get a better interest rate and terms so it can be easier to pay off. 
  4. Debt Management Plan: Work with a reputable debt management company to cut interest rates and work with a repayment plan. This can save you time and money.

The last resort for some may be bankruptcy which is a court order saying you do not have to pay off the debt(s). Bankruptcy comes with many repercussions so make sure to thoroughly consider and attempt all other options. If you do move forward with bankruptcy make sure to work with a reputable lawyer and company. 

Debt may seem insurmountable, but with the right tools and method, it can be overcome. Slow and steady can win the race. 

Get your own worksheet here to track your debt payments.

 

Find more lessons from our budgeting toolkit here. 

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