Today, 80% of Americans worry about the affordability of everyday expenses—regardless of income—according to research from Equitable. And these concerns come even before considering recent economic events: a volatile stock market and rising tariffs, both of which could reignite inflation. With essentials becoming increasingly expensive, many households are being pushed to rely on credit just to get by.
This is not a theoretical problem. Debt has already become a major reality for many Americans. TransUnion’s Q4 2024 Credit Industry Insights Report found the average household carried $263,923 in mortgage debt, $24,373 in auto loans, $6,580 in credit card balances, and $11,607 in personal loans. That doesn’t even account for student loans or medical debt. Debt is everywhere—and for many, it’s growing.
The Real Risk: Debt Spiral
The problem is that unmanaged debt snowballs. As interest accrues, monthly payments become harder to afford. Once credit card limits are maxed out—and nearly 1 in 5 Americans are already at that point, according to Fortune—accessing new credit becomes nearly impossible.
The New York Federal Reserve reports that nearly two-thirds of credit cardholders carry balances month to month. With interest rates averaging around 23%, that debt quickly becomes more costly than whatever was originally purchased. It’s not just a burden—it’s a trap.
But here’s the truth: now is the time to act. Tackling debt in uncertain economic times might feel counterintuitive, but it offers long-term stability, freedom, and peace of mind. If you want to regain control, here are three key steps to take today:
Step 1: Avoid Taking On New Debt
It might sound simple, but one of the best ways to stop a debt spiral is to avoid adding to it. Access to credit doesn’t mean you need to use it—especially for non-essentials.
When making financial decisions, differentiate between needs and wants. For instance, when considering buying a home, don’t simply base your budget on the "30% rule" (which says your monthly housing costs should be no more than 30% of your gross income). If you earn $10,000 a month, that guideline suggests $3,000 for housing. But a more conservative approach would limit housing costs to 20% of net income—maybe closer to $1,500 a month. That cushion can be used to pay off existing debt or save for emergencies.
Reducing new debt gives you the flexibility to tackle what you already owe. It's not about deprivation—it's about creating space for progress.
Step 2: Get Clear on What You Owe
You can’t solve a problem you don’t fully understand. Start by organizing all your debts:
Loan type (mortgage, auto, credit card, personal, etc.)
Outstanding balance
Interest rate
Monthly payment
Loan term
Once you see everything clearly, determine how long it will take to pay off each loan under your current payment plan. Then, consider ways to improve your terms. Contact lenders to negotiate lower rates, explore refinancing, or consolidate multiple debts to simplify payments and potentially reduce interest.
When it comes to repayment strategy, you have two main options:
Highest Interest First (Avalanche Method): Focus on debts with the highest interest to minimize total costs.
Lowest Balance First (Snowball Method): Pay off small debts quickly to build momentum.
Whichever method you choose, commit to a monthly repayment amount you can sustain—and stick to it.
Step 3: Repay Aggressively and Look for Extra Income
Once you have a repayment plan, your next goal is simple: follow through. But it gets easier—and more impactful—if you can increase your income. Consider freelance work, overtime hours, side gigs, or even selling unused items.
Any extra cash—bonuses, tax refunds, birthday gifts—should go straight toward debt. Want to take it further? Evaluate big-ticket changes: downsizing your living space or trading in your vehicle for a more affordable one.
Even small payment increases make a difference. For example, if you owe $10,000 on a credit card with an 18% interest rate and make only $160 monthly payments, it would take over 15 years to pay off—and you'd shell out nearly $20,000 in interest. Add just $50 more per month? You cut the repayment time in half and save around $12,000 in interest.
The key is to always pay more than the interest accruing each month. Many people only make the minimum payment, which may not even cover the interest—keeping them trapped in debt indefinitely.
Long-Term Vision: Financial Peace Over Short-Term Comfort
Getting out of debt isn’t painless. It takes time, discipline, and sacrifice. But the rewards—flexibility, stability, and the ability to enjoy your money without fear—are worth every effort. You’re not just paying off a balance you’re buying freedom.
In the end, remember: the road may be hard now, but the destination—financial independence—is worth every step.