Are You Stuck in the Debt Cycle? Here’s Your Way Out

Woman breaking her debt cycle.

Okay, so this article isn’t our usual fare.  We mostly cover celebrity wealth, but we get a lot of people asking about some of the older articles we published on the site – which are mostly about debt – so here goes.

Did you know that the average US citizen has about $38,000 in personal debt, excluding home mortgages? Only 23 percent of Americans can say they carry no debt. Both of these numbers have gotten worse in the last year.

Unfortunately, this results in a debt cycle that has few people staying afloat. 2 in 10 Americans spend 50-100 percent of their monthly income on debt repayment. This leaves little leftover for savings, emergencies, and daily living expenses.

Some age groups, like older millennials (25-34), have even more debt, with numbers rising to $42,000.

Are you stuck in this debilitating cycle? What is a debt cycle exactly, and how can you get out of it?

We’re here to show you there is a light at the end of the tunnel. Keep reading for some strategies on getting out of this vicious cycle.

What Is a Debt Cycle?

Anyone can get caught in a debt cycle—TV celebrities, baby boomers, college graduates, even our nation as a whole. Debt knows no bounds. How does this happen?

Let’s look at an example. Say you’re a recent college graduate with about $30,000 in debt from student loans. To pay off those loans, you borrow more money—increasing your debt.

As your debt rises, it could start to negatively affect your credit rating score. Soon, you owe more money than you’re making- every paycheck goes to paying off that $30,000. But now, your debt has increased with your borrowing, and you owe even more than you initially did.

If you don’t pay attention, your debt gets larger and larger, and you just can’t make enough to pay it off. Your money goes to paying off your debts rather than to your savings account. This is the vicious debt cycle.

How to Get out of Debt

Knowing that debt Is Not A Life Sentence, you can make efforts to get out of the debt and also reclaim your financial freedom.

First, pay more than you ‘have to’, if you can.

Every month, you get a statement that tells you how much you owe. If you keep paying this dollar amount, you’re paying the least amount possible over the most extended term, and paying more interest in the process. If you can afford to pay more than the minimum, you’ll pay it off sooner—with less interest.

Next, lower your spending and increase your earnings.

This is perhaps the most obvious, and yet challenging, thing to do. Take a good hard look at your budget and come up with a viable debt repayment plan you can stick to. Cancel your many TV subscriptions, skip that fancy latte, and perhaps pick up a second (or third) job.

Last, consider consolidating your debt, which can help lower interest rates.

In turn, your money is going to the principle, not the interest. Debt consolidation combines your various debts into one single payment, making it more manageable. This tactic also turns high-interest debts into a low-interest amount you can actually afford—that way, you can pay it off even faster.

Keep Your Money!

Getting caught in the vicious debt cycle is difficult. It can take a toll emotionally, mentally, financially, and otherwise.

But there are ways out—and we hope you can see the other side. But make sure once you’re out of this cycle, you should take measures to avoid falling in the debt cycle again.

If you’re looking at reading more about debt, we recommend these websites:

Our Debt Free Family – A great narrative about one couple working hard to pay off their debts.  Recommended for great examples of paying off large amounts of debt.

Blogging Away Debt – A team website of men and women who are paying off their debts.

 

Enjoy Plunged in Debt?

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