The average household carries $137,063 in debt, while the median household incomes is less than $60,000, according to data from the Federal Reserve and U.S. Labor Department. While it’s easy to get into debt, it can be hard to get out.Here are five tips personal finance experts recommend to lower your debt burden:
1. List and prioritize
Create a list all of your debts by amount owed and the interest rate you are paying.Then prioritize your repayment based on one of two strategies:
- The Avalanche. Focus on paying the debt with the highest interest rate first, to minimize the total interest you’ll pay.
- The Snowball. Focus on paying the debt with the smallest balance first. While this may seem counterintuitive, it’s recommended for those who have difficulty sticking to a repayment plan. The smallest balance gets paid off sooner and then its debt repayment can be devoted to the next debt. This gives you a powerful psychological boost and sense of achievement.
2. Pay more
Pay more than the minimum amount due. Your lender receives more interest income from you if you pay the minimum, but that’s not what you want.Think of ways you can increase your income to make the extra payments, such as:
- Taking a second job or freelancing.
- Asking for a raise at work.
- Devoting extra cash to debt repayment, such as your refund check.