The following is a guest blog post:
Most people have big plans for their futures—a list of things that may not be possible at this exact present moment, but that they hope will come true in time. The possibilities are endless: having children, going back to school, retiring, traveling the world, buying a home, moving to a new city, adopting pets, making a career change, investing, owning a business and many more.
Debt Has Short- and Long-Term Consequences
Whatever your dream, having debt is the quickest way to derail its actualization. Here’s an example: Approximately 40 percent of older Americans have $5,000 or more in credit card debt. Nearly one-fifth (22 percent) carry more than $10,000 in credit card debt, which means many owe more than they have available in their checking accounts. In fact, more than one-third of older Americans have less than $1,000 in their checking accounts. It’s easy to see how this impacts retirement. Significant debt and limited savings ensure people have to work longer—and possibly more hours—just to manage day-to-day expenses.
Similarly, the cost of raising a child is perpetually on the rise. This is a very real expense parents must consider. As Time reports, the cost of raising a child to age 17 for a middle-class family is now around $233,610. The cost of raising a child in a lower income bracket is still $174,690 on average. For families with higher incomes, the average price tag hovers around $372,210. It’s already a tall order to come up with double-digit thousands of dollars per year to raise a child; doing so with debt is even more daunting.
In the best-case scenario, consumers have to balance debt with their future plans. In the worst-case scenario, debt delays or derails these plans altogether. The only way to make sure debt doesn’t kill your future is by addressing it proactively now, in the present.
Figure Out Your Game Plan
Unfortunately, debt doesn’t disappear if you close your eyes and wish hard enough. Eliminating it requires formulating a plan and committing to it. Here is a litany of possible strategies to consider:
Balance transfer: Are you struggling with high-interest credit cards? You may be able to transfer balances to a lower- or no-interest card with a different provider. This does cost a fee to initiate, so make sure you’ll be saving more in APR than you’ll be paying in fees before doing so.
Debt consolidation: Are you struggling to keep track of multiple debts? Some debtors take out a single personal loan to pay back multiple high-interest balances then focus instead on repaying this single loan in a process called consolidation. This option is typically only viable for consumers with good credit.
Debt settlement: Are you carrying more than $5,000 or $10,000 in credit card debt? There’s a chance you can reduce your principal balance, meaning you end up owing less than the original amount. Working with an organization like Freedom Debt Relief can help consumers come up with a plan to save up enough money to initiate negotiations with creditors.
DIY approach: Handling debt repayment yourself may be your best bet, but consumers beware: Only a combination of savvy budgeting, steady or increased income and constant vigilance will make this strategy a success. Putting every extra penny toward debt repayment will speed up the process, but you’ll also have to hold yourself accountable every step of the way.
Planning for Financial Security
As you work to eliminate your debt, you should also work on your overall financial literacy. This will help you make saving and investment decisions that pay off in the future. Don’t let debt kill your financial future; get a plan now and start making moves toward making your dreams come true.