Paying Off Debt Without Feeling Overwhelmed

Reading time: 4 minutes

Americans have a combined record high of $14 trillion in household debt, according to the Federal Reserve. With such widespread pressure to pay off loans and lines of credit, much of the U.S. population may think it's impossible to improve their financial situations. However, with some hard work and smart strategies, just about anyone can tackle their debt without feeling overwhelmed.

Here are a few places to start:

Negotiate with your credit card company

It's true that credit card companies exist to make money, but many of them realize that they can get more out of their customers by negotiating. Someone who has no hope of paying off a big balance might walk away completely, leaving the company with a significant charge-off.

Many credit card companies will lower your interest rate to help you get out of debt faster. This gives customers hope and encourages them to make payments on time. That's good for you and for the credit card company, so don't be afraid to ask.

Prioritize your payments

If you have several credit cards, organize them by interest rate (highest to lowest). Your first mission is to eliminate debt from the account with the highest rate. Make minimum payments on the others and focus any surplus money on the most expensive card. Start small. If you can only afford to pay an extra $10 the first month, then that's what you should do.

This process will take time. Depending on how much debt you have on the card with the highest interest rate, it could take many months or even years. Stick to it. Eventually, that balance will reach zero and you can move on to the next card on your list.

Consolidate your student loans

Student loans can stay with you for decades. That's not always a bad thing if you are able to take advantage of a lower interest rate by consolidating your loans. Putting all of your student debt into a single account will simplify your financial life by reducing the number of monthly payments you have to manage. Depending on when you consolidate and what kind of interest rate you can get, you could also dramatically reduce the amount you pay over the lifetime of your loans.

Student loans also generally have significantly lower interest rates than credit cards. That means you should focus your extra cash on your credit card debt while you continue to pay your student loans on time.

Pay your bills by the due date

Late payments cause many people to stay in debt longer than they should. When you pay a bill late, your interest rate can go up, and the company may also charge you extra fees. When you pay your bills on time, however, you don't suffer those penalties. You get to keep more of your money instead of giving it to someone else just because you sent the check a few days late.

Build momentum

As you chip away at your debt, you will spend less money on interest payments and late fees. But don't use the extra cash to take a lavish vacation. Commit it to reducing your debt even more. Eventually, you'll find that you're living without any debt at all. That's when you really get to use the money you earn to enjoy life instead of barely making ends meet.