Household Debt Tips to Help You Clean House
Data from the Federal Reserve Bank of New York shows that by mid-2019, American households had $14 trillion of outstanding debt. That number only continues to rise. As interest rates go down, people take on more debt because it seems to make sense to them. They think about the current low and its interest rate. They do not seem to think about their total debt. Mortgages take up about 66 percent of all household debt.
Those numbers are staggering, but what does that mean for you? It means that you need to be aware of your own household debt and begin to work towards lowering it. Continue reading this article to find out some household debt tips to begin to lower the debt within your own household.
Household Debt Tip #1
One of the best household debt tips you can have when working towards eliminating your debt is the debt snowball method.
The Snowball Method
This helps you pay down your debt quickly and paying more than the minimum payments. The way it works is you list out all your debts and the amounts that you owe. You list them in order from the lowest to highest amount that you owe. You pay the minimum balance on all of the debts with the exception of the smallest one. You then pay as much money as you can pay per month on the lowest debt until that debt is paid off. Then you move to the next one. You pay the minimum balance on all your other credit cards except the now lowest one. You pay as much as you can per month on the debt until it is paid off.
Over time you can begin to watch your debt dwindle. You also have the satisfaction of paying off your debts. Since you are starting with the smallest debt, you can see that debt go away first. This helps you work on your debt without it being too overwhelming. Financial experts may tell you that you should start with the highest interest debt that you have so that high interest does not continue to accrue. No matter which method you pick, remember you are still paying off your debts.
Household Debt Tip #2
Another one of the best household debt tips you can have to decrease your debt and your clutter is to sell items in your home.
Sell the Unnecessary Things
If you are like me, you have a ton of stuff sitting around your house that you are not using. These items just collect dust and take up space. You should look through those items and decide which ones you might want to get rid of. How many of those items are still in boxes and have price tags on them? Who could not use some extra money that you can then put towards paying off your debt?
There are many sites where you can sell your items. You do not have to do much work to sell your items. You need to write a description and take a picture that you can upload to the site where you want to sell your items. There are many different sites available that you can select based on the items that you want to sell. They have sites for children's clothes, women's clothes, books, and household goods. You simply have to find the site that best fits the items that you want to sell, create an account and you are on your way.
Household Debt Tip #3
Another great one of the household debt tips is to reduce the bills from around the house. When you reduce your bills, you have extra money to use to pay off your debt.
Save on the Household Bills
Some of the steps you can take are to adjust your thermostat by a couple of degrees down in the winter and up in the summer. Changing the temperature of your thermostat can save you hundreds of dollars over the course of the year. A few degrees does not make a huge difference in how your house feels, but it can save you a large amount of money. This money can be used for your debts.
You can reduce the electricity that you use in your home by switching all of your lightbulbs to energy-saving ones, which can save you money over the months. You can also unplug all of your appliances that are not being used. When you are not using your appliances, if you leave them plugged in, they are still using some amount of electricity. This means that you are being charged for those appliances that are plugged in, even when you are not using them.
Household Debt Tip #4
One of the household debt tips you can use is to negotiate your bills. When your bills feel like they are out of control, you may be able to call your creditors to see if you can negotiate them to a lower amount.
Negotiate Your Bills
You would be surprised at how often people call their debtors to see if they can lower the amount they owe. If you have a good history with the creditor, then you may be able to get lower interest rates. You may be able to negotiate your cable or Internet bills. There is a lot of competition out there, many companies are willing to negotiate with you so they can keep your business.
You may be able to negotiate your medical bills, even if you have the money to pay them in full. You can still try to negotiate them as much as you can. Auto insurance is another industry with a lot of competition. You should be able to negotiate discounts with little effort. You may be able to save on your auto insurance by signing up for online billing, bundling, or using safe driver programs. You can also review your current coverage to make sure you are not paying for things you do not need.
Household Debt Tip #5
Another one of the household debt tips is to increase your income. This may not always seem like an easy option, but it could be easier than you think.
Grow Your Wealth
Is it possible for you to work overtime at your current job? If not, can you get a side job in addition to your regular job? This does not have to be a forever job, just one that you do long enough until all of your debts are paid. This can help put you in a better financial position.
You can pay off your debt and create an emergency savings account. You could be an Uber driver and make extra money that way. There are many people that make so much money that they quit their regular job and drive for a living. You create your own hours and decide what routes you want to drive. As long as you do not mind driving, this could be a great job for you.
Perhaps you cannot take on a second job outside of the house. There are many jobs that you can do from home. There are websites that help your search for jobs that you can do from home. They may be some type of consulting or contracting work that may be perfectly suited for you.
What is Debt?
Most people consider debt to be a bad thing. I like to apply the ‘everything in moderation’ school of thought to just about everything in my life, including debt. Not all debt is bad. Before I dig deeper into that, let's talk about what debt is.
Debt is when you owe money to another person or entity. Any money you owe elsewhere is considered debt. When you receive an item or a service, but do not pay for it all up front, and you agree to pay for it in the future, that is debt. You typically make multiple payments to repay a debt.
There are many different types of debt. Each person has their own debt, but when you are looking at the total debt of everyone in a house, that is considered household debt.
Not All Debt Is Bad
Now, let's circle back to good debt and bad debt. Not all debt is bad if it works for you and not against you. You may not ever be able to be debt free. Not many of us can afford to pay for a house all at once. Many of us cannot even pay for a car all at once. Even if we can, we may not want to. There is some benefit to having debt, such as the tax breaks you get because you are paying a mortgage.
When you pay the mortgage, you gain equity in the house, which is the amount of the house you own. So, to recap, good debt is any kind that works to your advantage. If it does not put you in a bad financial place, it is most likely good debt. If it helps you to attain positive credit, it can also be good for you. Even with good debt, you should be mindful of how much debt you have and consider helpful household debt tips.
Are There Different Types Of Household Debt?
In these household debt tips, I explained the different types of household debt that you might have.
Mortgage
I talked about a mortgage in the paragraph above. What I did not mention is that one of the typical household debts is a mortgage. A mortgage is also one of the largest debts that you will take on in your lifetime. Most financial advisors agree that a mortgage is one of the debts that are not negative to have. Mortgages come in different terms. You can have a 10, 15 and 30-year mortgage. It is possible to become 'house poor' which is when people buy too big of a house that they can barely afford. Just because you can take out a mortgage does not mean you should. Be mindful of the mortgage you take on.
If you have a plan to apply for a mortgage loan, It's important that you go to the right lender. By putting in your information, you will be able to see the lenders you may qualify for, and you may even get offers from them:
Car Loans
Many of us cannot afford a car without taking on car loans. With the advances that we have made with technology, you are able to determine the actual cost of vehicles, so car dealers are not able to take advantage of you. You can get loans from the car dealership, a traditional bank or credit union. You do not have to take the first loan that you find. You are able to do some research to find the accurate cost of the vehicle that you want.
Credit Cards
This is one of the biggest problems when it comes to debt. Credit Cards give us the freedom to make purchases whenever we want. However, it makes it far too easy to buy items impulsively. You must first understand your own behavior before you take on credit cards so that you can be aware of how you will use them.
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Can I Eliminate Debt?
The good news and one of the best household debt tips that I can give you is that you can eliminate your debt. The one thing you probably do not want to hear is that it takes consistent and hard work. There are many steps you can take to work towards reducing your debt. Some of the best debt advice you can get is to tell you those steps you should take to get rid of your debt.
Know Your Debt
You should take a look at your debt and truly attempt to understand it. You need to compile all of your debt and list it. You can pull your credit card statements, bank statements, and any other debts that you have. Use these statements to gain a clear understanding of how much debt you owe and to whom. You can use a debt payoff planner to list out all your debts and begin to organize them.
Pay More than a Minimum
You want to focus on paying more than the minimum payments so you can pay off more debt faster. You should begin by focusing on your debt with the highest interest rates first so that you can reduce the amount of money you owe over the long term.
Be Persistent
You need to determine why you want to eliminate your debt. If you have a reason why you are reducing your debt, then when it gets hard to remain focused, it makes it easy to stay the course. I am going to be honest with you when I tell you that there are moments when it gets hard, because sacrificing to pay off your debt takes perseverance and pushing through the hard times.
What Mistakes Should I Avoid?
When thinking about household debt tips, there are things you should consider avoiding.
When you focus on paying off debt, it is easy to forget about building up your savings account. It is possible to do both. It is especially important to create an emergency fund for those items that pop up out of nowhere. When these emergencies pop up, if you have any emergency fund, you do not have to borrow money to pay for it.
Not having a plan is a bad idea. When you start to pay off your debt, you need to have a plan. This should highlight what debt you want to pay off first and how much you owe. You should make sure that you track your progress in paying off your debt. This can help keep you motivated and moving towards paying off your debts. When you track your progress, it shows you how much progress you are actually making. This can also help motivate you to make a larger effort to pay off more debt faster.
Another mistake you can make it taking on more debt. You may think that since you are paying off your debt, that you can spend more. It is easy to fall into the same trap of spending more money than you really have.
Another mistake you can make is to make late payments. Late or missed payments are the quickest way to hurt your credit rate. In addition, you get penalties and interest added on to the debt you already owe. That just makes it harder to pay off the debt that you owe.
Conclusion
The biggest take away for you from these household debt tips is to work hard to pay down your household debt. Debt is continuing to rise and you should do everything you can to make sure you are not in that group. Getting into debt is really easy, but getting out is another story altogether. Another one of the great household debt tips is that it takes time and effort to get out of debt. You have to stick with it even when it gets hard.