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Today I have a guest post from Joseph Hogue over at MyWorkFromHomeMoney.com, talking about the scary state of debt in America, and how to overcome it. Enjoy!

how to save yourself from debtPaying off debt has become more than an individual goal, it could mean the very survival of our nation

I love the debt payoff stories you read on blogs. Following the story of how someone paid off a seemingly insurmountable amount of debt is not only hugely motivating but usually comes with some great ideas.

At the same time, reading these stories can be difficult for the millions of Americans that struggle with their debt.

Colin’s own story of paying off $21,000 in debt over 18 months relates to a long journey of changing his debt mindset, understanding his spending triggers and dealing with setbacks.

As exhausting and as frustrating as that debt payoff journey can be, it’s a journey we need to make, not only as individuals but as a country.

We talk about debt on an individual basis but it’s every individual that makes up our nation and the massive sum of that individual debt could soon affect everyone in ways we’ve yet to realize.

America Has Gone Overboard on Debt

The average American household owes more than $52,500 in debt and that doesn’t include mortgages. The average household pays a dollar of every $5 earned just to meet those monthly debt payments and people in 13 states owe more than they make in a year on average.

Debt in America has grown to Titanic-proportions and the ship is about to hit the mother of all icebergs.

You probably have a good idea of what all that debt is doing to your own life and financial goals. It leaves you little or no money to save for retirement. More than 40% of households report having less than $10,000 saved for retirement.

Not being able to save also means that you’re just one financial emergency away from having to severely cut back on spending or even a total financial collapse in bankruptcy.

Now imagine what that means collectively to the entire nation, a nation where 10,000 people reach retirement age every day but don’t have enough saved for basic expenses. It’s a nation that could soon see consumer spending, which accounts for 70% of the economy, take a nosedive because there’s just nothing left after debt payments.

Ditching our debt addiction has become more than just a personal goal, it’s become a national necessity!

How to Save Yourself from Debt

Sometimes, it’s just that harsh wake-up that gives you the motivation to change. Realizing how much your debt is costing you and how long it will take to pay it off can be one of those wake-up calls.

I got serious about paying off my credit card debt when I used a credit card payoff calculator and saw it would take 62 months and nearly $5,400 in interest to pay off the debt. I would have been paying half again as much interest on my original purchases if I kept to my monthly $250 payments instead of really attacking my debt.

So I ask you…

  • How much interest will your current debt cost you?
  • How long will you be paying off your debt with your current payments?

If that’s not enough to shock you into getting serious about your debt, create a mental picture of your financial goals and what your life will be like once you’ve paid off your debt.

This is an activity I use with investment advisory clients and it’s critical to helping you stay on budget and saving. If you can create a real mental picture, not some vague goal of retiring on a sandy beach somewhere, your goals become real and help motivate you even when you’re tempted to outspend your income.

  • What will you be able to do with that extra money that isn’t going to interest payments? What vacations will you plan and what other plans will you make?
  • What do you want to do on a daily basis once you’ve reached your financial goals or in retirement?

Attack your debt from both sides, from expenses, and from the income side!

Too many people think of their budget only as a way to track and cut their expenses. The sorry fact is that most people don’t make much money, not enough to pay basic expenses and save enough for retirement anyway. The solution is to look for ways to earn more on the income-side so you don’t have to cut your expenses to the bone.

  • Read up on side hustles like starting a blog or self-publishing that can make hundreds a month on as little as a few hours a week
  • Don’t feel like making extra money is something you have to do forever. Set small goals like paying off your debt or building an emergency fund.

Create a strategy to pay off your debt.

There are two popular strategies for debt payoff, the avalanche, and the snowball method. Which you follow will depend on whether you need more motivation or want to save more money.

  • The debt avalanche starts with listing your debts from highest rates to lowest. You make regular payments on all but split extra payments among the debts with the highest interest rates.
  • The debt snowball starts with listing your debts from lowest amount to highest. Again, you make regular payments on all but split extra payments among the smallest balances.

The avalanche method saves you the most money because you’ll pay off those high-rate debts first. The snowball method may cost a little more but it can be incredibly motivating to see those debts fall off your list.

The word financial freedom is used pretty casually on the internet. The actual feeling is difficult to describe but it’s one of the benefits to paying off your debt and knowing you are on your way to reaching your financial goals. In our society where money is the #1 reported cause of marital arguments, not having to worry about debt or reaching those goals is an amazing change.

The secret to financial freedom is to owe yourself a debt. After you’ve paid off your debts, keep saving and investing as if you were paying a debt to yourself. Instead of paying interest on that debt, you’ll benefit from the return on your money.

I try to be an optimistic person but I’m not confident that the debt situation in America will get better before it gets worse. Fortunately, you don’t have to move the entire country to change. Changing your own mindset and turning your own finances around will help you avoid the worst of our debt-burdened future and create the financial future you deserve.


Joseph Hogue worked as an equity analyst and an economist before realizing being rich is no substitute for being happy. He now runs five websites in the personal finance and crowdfunding niche, makes more money than he ever did at a 9-to-5 job and loves building his work from home business. 

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Colin // RebelwithaPlan

Colin Ashby is the writer behind Rebel with a Plan, a website dedicated to people who choose to rebel against the norm of living in debt and feeling financially unenlightened. He believes everyone has an eccentric quality to embrace and that lattes are sometimes a necessity (despite what the personal finance community tells you).

Latest posts by Colin // RebelwithaPlan (see all)

5 Comments on The Average American is Drowning in Debt. Here’s Your Life Preserver

  1. Joseph Hogue
    April 9, 2018 at 5:21 pm (6 months ago)

    Thanks for allowing me to share this Colin. Hope it helps some people get out of debt and make a little extra.

    Reply
    • Colin // RebelwithaPlan
      April 17, 2018 at 11:44 pm (5 months ago)

      Thanks for writing it!

      Reply
  2. DC @ Young Adult Money
    April 11, 2018 at 2:53 am (5 months ago)

    I agree 100% with this -> “Attack your debt from both sides, from expenses, and from the income side.” I usually recommend attacking the savings side first, but the income side is where you can make huge strides.

    Reply
    • Colin // RebelwithaPlan
      April 17, 2018 at 11:45 pm (5 months ago)

      Tracking your spending is kinda life changing, haha. I started using YNAB a few months ago and love it! Made me more conscious of my spending. Definitely agree the income side is where you can see huge strides.

      Reply
    • Joseph Hogue
      April 18, 2018 at 12:07 am (5 months ago)

      Totally agree. People definitely need to get tough on their expenses. I talk to a lot of people that ‘just don’t have anywhere to cut’ and then you find out how much they spend on junk food, eating out and other non-essentials. Even if they are able to cut some though, it’s still hard to make it work without increasing income a little.

      Reply

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