Strategies for paying off debt
Choose an approach and stick with it
Household debt in the United States totals more than $16 trillion, according to a recent report from the Federal Reserve Bank of New York’s Center for Microeconomic Data.
That’s an average of about $125,800 per household. It includes mortgages, student loans, and consumer debt. Most of us likely owe money to someone.
How do you approach your debt? Do you make minimum payments? Do you ignore it and hope it’ll go away?
The first option would eventually pay off your debt – if you don’t add more each month. The second would increase your debt because of interest charges. And your credit score would decline as you missed payments.
Instead, here are a couple common approaches that you could implement and a few tools you could consider.
One common approach is to use a debt snowball. It works like this – make a list of your debts from smallest to largest and make payments each month, adding any extra payments to the smallest debt.
When you pay off the smallest, add that payment to the next-smallest, and so on. Your payment toward the smallest debt continues to get larger, like a cartoon snowball rolling down a mountain.
Continue this until you’ve paid all your debts.
A variation is to focus on the debt with the highest interest rate, then the next-highest, and so on.
Finally, Everence® members have access to Lutheran Social Service, which can help with debt and budget counseling. Visit everence.com or lssmn.org/financialcounseling/everence for details.