If you’re in debt, you’re not alone. The average American has more than $100,000 in debt, according to Experian. But being debt-free is possible, and it’s a freedom like no other. If 2024 is the year you want to Get Your Money Right® by tackling your debt, read on.
Not all debt is created equal. A home loan, for example, has different implications for your financial health than the same amount in credit card debt.
That’s because when you have a mortgage, you also own part of your home. Sure, maybe the bank owns the majority, but your monthly payments decrease your debt and increase your equity in your home.
Meanwhile, a mortgage-sized amount of credit card debt is a different pair of shoes. That’s because credit card debt tends to be higher in interest. Plus, it doesn’t help you build any equity. It just weighs on you.
Start by writing down all your debts, needs and income streams to get going on a budget that can help you knock out your debts one by one.
Finding the help you need to tackle your debts
There are many strategies for tackling your debts. But you’d be best served to find one you can stick with.
The snowball method works by listing out all your debts and starting with the smallest one. It will help you feel like you’re making headway, and might give you the momentum you need to keep going.
The avalanche method is targeting your debts with the highest interest rate first, minimizing how much you pay in interest over the long run.
If you’re in credit card debt, paying more than the monthly minimum payment can also help you chip away at the total amount owed.
But sometimes debt can feel overwhelming, and maybe none of the methods above is feasible for you.
Depending on your situation, you might consider a debt consolidation loan, which allows you to transfer high-interest credit card balances to a personal loan to reduce your monthly payment. Learn more about the debt consolidation loans SoFi offers.
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