CREDITBUDGETINGLIFESTYLE & TRAVEL

Debt is Not a Bad Word

Debt is Not a Bad Word

Debt has a stigma around it. People are afraid of having it — and afraid to admitthey have it — which typically means they don’t know how to deal with it. But debt is not a bad word — it’s actuallyvery common! According to the Federal Reserve Bank of New York, $841 billion was owed in credit card debt in 2022. If you have debt, you are not alone.

Types of Debt

There are different types of debt that you can have. Common ones are mortgages, auto loans, student loan debt, and of course, credit cards. Knowing what debt you have and how much you owe is the first step to tackling it. This will help you accurately add your payments into your budget and be conscious of the bills you are paying every month, so it doesn’t feel like you’re just throwing away hard earned money. If you are consciously thinking about your debt payments, you could pay them off quicker by throwing extra money into them on months you can afford it. Paying more than your standard payment amount when you have the funds is a good way to take control of your debt and not let your debt take control of you.

Why You Shouldn’t Freak Out

The topic of debt is not the most fun conversation to have, in fact in tends to make people uncomfortable. Looking at large amounts of money that you owe can be intimidating, but breaking it down and looking at it in chunks makes it look a lot more manageable. If you stay on top of your payment plan and stay committed every month, that number will look much less intimidating.

The Silver Lining

There is a very good thing that comes out of having debt and paying it off; your credit score! By making every payment you are increasing your credit score, which will help you later if you apply for another loan. Not having any debt at all can result in not having a credit score, something you will want to have when a big purchase comes up. If you currently don’t have a line of credit you are paying, try opening one with very small monthly payments, something you know for sure fits in your budget. This way you are building your credit and learning how to manage monthly loan payments.

Sources:

• https://www.fool.com/the-ascent/research/credit-card-debt-statistics/
• https://www.debt.org/faqs/americans-in-debt/
• https://www.cnbc.com/2018/08/20/how-much-debt-americans-have-at-every-age.html
• https://www.fool.com/the-ascent/research/credit-card-debt-statistics/