As the years progress, the number of Americans in debt continues to increase. With over $16 trillion of debt the previous year, debt is likely to grow further and even double by the end of 2029. On a smaller scale, an average American has an average credit card debt of $6,500, with 12% of them placing medical bills as a large portion of that debt, as well as living conditions including rent, food, and utilities.
Many Americans are just getting by day-to-day, with everyday costs rising higher each year. Today’s costs are already 30% higher than 20 years ago. Some major price increases include housing and college tuition fees. Aside from necessities, people are also spending on non-essential items such as luxury items and clothing, already adding up to the debt they already have. The purchase of non-essential items like these affects the debt of 32% of Americans.
Trimming Down the Debts
It is important to keep your credit card balance low by considering a new credit card that enables you to transfer off-balance without accumulating additional interests. Also, the rule of earning more and spending less means looking for part-time work or finding other sources of income.
If cutting costs is not realistic for you, identify your needs and wants while being realistic. If a coffee down the block costs you $7, you can instead pick up coffee at $3.50 somewhere else and place the other $3.50 in your savings. Being practical about your spending habits and knowing your wants and needs are some basic steps to follow to save up on money. When looking for a home loan in Orem, Utah, for example, taking your time and finding the best deal for you should work better instead of getting more costly options offering the same service.
Learning Your Priorities
There are many ways to convince yourself to stay in at home instead of dining outside and spending a fortune on the next fashion trend that changes every week. There are many things to save up and invest for, including but not limited to: your future kids, healthcare, retirement, a new house, a car, and education for the already increasing college tuition fees. Consider which ones you prioritize and start your financial planning.
Your Financial State
Upon starting work, you’ll begin earning. Know what you have and what you owe by listing a net worth statement and adding assets and liabilities. When you subtract your liabilities from your assets and have a larger amount of assets, consider yourself a “positive” net worth. If it’s vice versa, you can still follow the positive path.
Categorizing your savings and investments as well as paying your dues first (e.g. you and your family) is a smart move as well as automatically placing some of your income to an investment or savings account. Participating in retirement plans like 401(k) or 457(b) will reduce your taxes and instead go to your benefit.
The first thing to consider is if you have enough money for saving and investing. If you run through your income like wildfire, start being more aware of spending habits or find other means of income.
The next step is to ease your credit card debt by paying them off as quickly as possible. Do use credit wisely when you need it and know how much you owe. Prioritize high cards charging the highest rates. After dealing with your debts, you can start working for money that you can save or invest, or better yet, make money work for you.