Biggest Waste of Money: Your Debt
Debt is a black cloud over many Americans: The average household has $137,000 of debt, according to the Federal Reserve. So where is all your money going?
Here’s a breakdown:
STUDENT LOANS
We owe a collective $1.4 trillion in student loan debt in the US, and the average student graduates college with a whopping $39,400 in student loans. While it can take between 10 and 25 years to pay off your loans on most payment plans, it typically takes someone around 22 years to fully pay off their loans.
Feeling underwater? You might be able to refinance your loans to secure a lower interest rate. Depending on your career, you may also be eligible for student loan forgiveness programs.
Need more help? Here are 5 things you should know to tackle your student loans.
CREDIT CARD DEBT
The average American has 2.6 credit cards, according to a Gallup poll. Fun fact: All the credit cards in circulation could span the earth over 3.5 times.
Less fun: our dependence on those cards. One in 5 people spend more than they earn, and 2 in 5 can’t afford a $400 emergency expense, according to the Federal Reserve. To keep a healthy credit score, which can help you apply for loans, and buy a car or a home, you should pay your bills on time every month, and only use between 1% and 30% of your available credit. Credit scores range from 300 to 850, and a good score is considered 700 and above.
Need help improving your score? Here are 5 ways to get your credit score out of the dumps.
LIVING EXPENSES AND DEBT
Don’t get blindsided by debt when it comes to your living expenses. Forty million people say they are living in a house they can’t actually afford, according to Harvard study. Experts say your mortgage should be less than 30% of your monthly income.
And watch out for those big splurges that can send you into debt in the future, like vacations and weddings. Americans will spend $2,256 on a summer vacation, and charge $1,019 of their vacation expenses on their credit cards, according to Nerdwallet. Weddings are a whole other beast—one-third of couples will go into debt to pay for their special day, according to The Knot.
Overall, be careful with your spending—pay your balances in full, and set a monthly budget to keep your head above water and your finances in line.
WATCH MORE
4 solutions to common student loan issues
Tips to pay off debt from 7 people who have actually done it
