today's Blog Post Was Written by Financial Coach Tonia Peasley
What is something 80% of Americans have but don’t want?
Nope, not a trick question…it’s debt. Did you know that 80% of Americans have some type of debt they owe? Broken down, if you owe someone for property, services, etc., you are one of the 262,560,000 Americans who have debt. Total consumer debt in the U.S. is at $14.1 trillion, with Americans carrying an average personal debt of $90,4601. Now, I’m all for being part of something, but I think we all want to do our best to “social distance” from being part of this group.
Debt doesn’t have to be something that consumes you. As a Financial Coach, helping people conquer debt is one of the hardest tasks I encounter. Why is that you ask? Building up debt often comes from habits, and habits that are not good for you are hard to break. Paying off debt isn’t a “one size fits all” kind of approach. Sure, you’ve heard all about the approaches of “pay off the largest debt first” or “pay off the highest percentage rate so you can save more money in the long run”. We can absolutely explore those routes, but there is more to paying off debt than a simple formula.
When I coach individuals, I pay attention to their individual needs. If I suggest one way and it really doesn’t work well for that situation and the individual, we won’t make much progress. My goal as a Financial Coach is to find the tools and resources that work specifically for each person’s situation and then play off that success.
Let’s say you have $1,000 in medical debt, $1,800 in credit card debt, and a $20,000 in a car loan. Let’s leave interest rates out of the equation and get down to business of making a dent in the debt owed. Conquering that small medical debt serves two purposes; medical debts are important to catch up on as you never know when your luck is going to run out and a fall might send you to the ER. Although you won’t be turned away for service, no one wants to get behind on medical bills. The second idea here is, throw as much money at the smallest debt as possible, pay it off, and experience that feeling of accomplishment.
You are now motivated to keep paying off the other debts.
Now, you will only have two payments instead of three. Therefore, more money can be paid toward the second one and a faster payoff will happen of debt #2.
Let’s talk about Who has debt. Take a look at this table, it might surprise you:
Average American debt by age2
18–23 (Generation Z)
40–55 (Generation X)
56–74 (Baby Boomers)
75 and above (Silent Generation)
Interesting enough, debt is something that affects most of us at one point or another in the process of life. The key is conquering debt and the urges to take on more debt. Building debt will definitely do one thing for you, it will affect decisions down the road or limit your abilities to really accomplish the goals you might have. An accountability partner goes a long way in helping you stay on track toward reaching your Financial Goals. Invest in yourself and give me a call, I’d love to help.
2 Source: Experian 2019 Consumer Debt Study