In the 2017 study done by Nerd Wallet it was found that the average American household with credit card debt has a balance of $15,654 and households with any kind of debt owe on average $131,431 (including mortgages).
One important factor that this study revealed was that Americans are putting medical expenses on credit cards. In addition to that, a significant amount of those surveyed said the biggest reason for their debt was unnecessary spending. The study conducted found that one reason for this debt is that Americans are faced with an increase in expenses such as food and medical and these expenses have increased at a faster pace than the increase in income.
So, if you are in debt what can you do to dig yourself out of it? Dave Ramsey recommends the “Snowball.” He describes the “Snowball” as a process where you list your debts from the smallest balance to the largest balance. You focus on paying of the smallest balance first while paying the minimum payment on all other debts. Once the first debt is paid off continue on down the list going to the next smallest balance.
As you pay off each of these balances it continues to free up more cash. Because you have eliminated the monthly payment of that debt it then allows you to put more cash toward paying off the next debt. The more balances you pay off the more money you have to pay off the next one. Soon you will begin to see the light at the end of the tunnel to becoming debt free.
To help prevent getting into further debt you should also focus on putting money into a savings account for emergency situations so that your credit card is not used for these emergency expenses.
Ramsey recommends that you save $1,000 before you even begin to pay off your debt.
Debt accumulates for many reasons. It could be student loans, medical expenses, credit cards, whatever the debt may be the most important thing is to create a plan to pay it off and stick to that plan until you are debt free.