According to a study done in 2021, Experian found that the average American holds a debt balance of $96,371.
That study also went ahead and broke down the average debt balance according to age groups:
- Gen Z (ages 18 to 23): $9,593
- Millennials (ages 24 to 39): $78,396
- Gen X (ages 40 to 55): $135,841
- Baby Boomers (ages 56 to 74): $96,984
- Silent Generation (ages 75 and above): $40,925
Student loans, car payments, credit cards and mortgages seem to be where a majority of debt balances lie, and with interest rates in some of those categories as high as they are, it makes it hard to get ahead when you may already be struggling to stay on top of your monthly payments.
KIRO 7 met with a financial expert and we’re sharing a handful of tips you can implement by your next payday.
Tip #1: Build up your savings.
Kelsey Curtis, senior financial planner for Decker Retirement Planning, recommends having savings with a minimum of $1,000, with the goal of working toward three months of your income.
Tip #2: Tackle your smallest debt first, pay minimums on others.
Also referred to as the “snowball method” in other financial practices. Curtis told KIRO 7 News to tackle your smallest debts with a larger monthly payment while paying the minimums on other debts. Once the small debt has been paid off, take that large sum and apply it to the next balance. Rinse and repeat until you’re paid off.
Tip #3: If you’re not tackling small debts, do NOT just pay minimums!
Especially on a credit card. Curtis tells us interest rates are high enough that you’ll end up paying more in interest in the long run, prolonging your payments to financial freedom.
Tip #4: Calculate your debt to ratio income.
For those of you overwhelmed at the idea of paying personal debts down to zero, let’s talk about the debt-to-income ratio. Experts recommend having a DTI of 43%. For example, if your monthly income is $5,500, make paying your debts off to $2,365 the goal.
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