Consumer debt is at an all-time high, and even though it could be argued that much of our economy is sustained by debt, that’s probably scant comfort to you if you’re drowning in debt yourself. But there is a way out of even the deepest debt crisis. You may be able to get yourself out, or you might need to enlist some help. But as is the case with most recovery programs, you first have to recognize the problem.
You’re certainly not alone
One very common element among people who find themselves over their heads in debt is a tendency toward self-recrimination. They tend to feel that their “failure” is unique to them, and often the product of some moral or intellectual shortcoming. The facts belie that tendency, however, as the average American household debt is over $90,000 in debt, and that average includes households that are debt-free. If you remove the debt-free households from the equation, the average jumps to a staggering $130,922, of which $15,762 is from credit cards alone.
Why are so many people struggling under such a huge debt burden? A significant part of that leap can be attributed to the fact that inflation has far outpaced increases in individual income. While income since 2003 has increased by roughly 26%, the costs of food, housing, higher education, and especially healthcare have risen considerably more, with some more than doubling in the same time period. If you go back even further, to the early baby boom generation, the cost of the average house back then – the biggest single expenditure for most people – was less than the cost of the average automobile today. When you add in how aggressively debt is marketed, it should come as no surprise that individual debt has skyrocketed, not just for the few, but for the many. It’s not about morals; it is simple math.
So if you were feeling alone in your indebtedness, rest assured that you’re not. Millions of people in the US and elsewhere are in the same boat as you. But if you’re ready to disembark from that crowded boat, it’s going to take some determination and hard work.
Finding your way out
There are probably almost as many “expert” opinions on how to get yourself out of that credit hole as there are people who are deep in debt, but a few basic actions are essential in any viable process. Among them:
Get a clear picture of your indebtedness – Most people actually have a very unclear picture of their actual indebtedness. They are aware of the major items such as mortgage, car payment, and the like, but often fail to consider other monthly expenses when composing their debt analysis. Take into account every expenditure that you face on a monthly basis, even the most minor ones. If they amount to nearly as much as or more than your monthly income, you definitely have a debt problem. And if you don’t have at least enough money left over every month to cover unseen expenses such as car repairs or replacement of a major appliance, you might not be in a debt hole now, but you’re probably already digging a hole that you’ll fall into in the future.
Don’t incur additional “bad” debt – Obviously, the essential first step toward getting out of a credit hole is to put down the shovel and quit digging yourself deeper in. That means not using credit to make non-essential purchases, no matter how tempting they might be.
Recognize and make use of “good” debt – Not all debt is bad. Some kinds of debt, such as a mortgage, should be viewed as an investment in the future. If you have a significant amount of high-interest debt such as credit card balances or even an old mortgage that charges a high interest rate, you could save a significant amount every month by consolidating those credit cards into a single loan at a lower interest rate and/or refinancing your mortgage to take advantage of historically low rates currently being offered by lenders.
Shop for the best credit deal – The credit market is very competitive right now, especially for people whose credit scores are good. Shop around to see what kinds of deals different lenders offer, especially on mortgage loans. And don’t forget to check out credit unions, which tend to offer better terms and interest rates than banks, as they are typically owned by and more favorable to their members, rather than corporations whose sole objective is maximizing profits.
But sometimes debt problems can seem overwhelming, and you may despair of ever being able to get yourself out of debt. That’s when you may need to turn to someone who can help you do just that.
When you need a helping hand
Sometimes, straightening out debt problems is simply beyond what most people can handle. The complexity of the process alone has probably contributed to as many debt crises as any other single factor. If you’re feeling overwhelmed by your debts, avoiding them is the absolute worst thing you can do. At that point (or hopefully, well before that point), you probably need to get some advice and assistance from someone who is a certified expert in resolving debt problems. A certified credit counselor can help you unravel all the complexities of your financial situation and advise you on ways to climb out of a debt hole.
You will want to ensure that the credit counselor or service is reputable, and not just in business to make as much as possible from their customers. Start by seeing whether the service is a member in good standing of the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA), both of which impose strict ethical guidelines upon their members. Certified counselors can offer much more than assistance straightening out credit card debts, and most are even prepared to help you with student loan debts, which are rapidly becoming one of the highest categories of individual debt. The important thing is to seek out assistance as early as possible.
Recognizing that you have a debt problem and taking the right steps to resolving that problem can be both a logistical and emotional challenge. But the sooner you take steps – the right steps – to get back on track, the easier it will be, and the better the results will be. So don’t punish yourself. Just realize that you’re far from the only person who is in this situation, that the conditions that got you here are not all of your making, and that there is light at the end of the debt tunnel in which you find yourself.