It's important to have a plan before you get into debt, and then when you're actively paying it off

There is no longer any shame associated with being in debt – it’s just too common! One recent survey found that the average U.S. household has more than $90,000 in debt. Of course, not all debt is technically bad, for example, when buying a house makes financial sense, having a mortgage to pay off will at least reward with you with full ownership of an asset that should appreciate over time.

On the other hand, the $15,000 of credit card debt that the average household owes isn’t always a good thing, especially because one-third of us carry some of that debt forward every month. That means a chunk of your money is being wasted on monthly finance charges, instead of what it should be going toward – decreasing your overall debt.

Paying off your debt is often the key step to financial empowerment. Without it, it’s hard to grow your savings or reach your financial goals on schedule. While having a lot of debt can seem overwhelming, you can begin to tackle it today. It may take a while to get to “debt-free”, but you’ll feel better once you see those monthly bills get smaller and smaller.

Here are some tips to help get your debt-tackling on track.

Consider using cash

Before you even have a plan for tackling what debt you have, do what you can to stop adding to it. Consider using cash for more purchases. The act of using physical money can often dissuade you from nonessential purchases that are boosting your total debt burden each month.

In addition, make sure that any automatic credit card deductions for products or services are ones you still want. We can help you identify recurring purchases and find other money saving tips based on your spending patterns with our Ways To Save feature in the mobile app.
Paying too much for cable? Consider cutting the cord and going to a cheaper streaming service like Netflix or Hulu.

Check out more of your personalized tips in our mobile app.

Create a budget

Here’s where you can start to get serious. It’s almost impossible to pay off debt efficiently without an in-depth look at where your money is going. Remember: you’re allowed to have fun! Entertainment can and should be a part of your life, just within a budget that‘s realistic for you.

To start out, try tracking all of your spending for up to three months to get a better idea of how your needs change over a longer period. From there, decide which of your expenses are tweakable (eating out) and which are not (rent). A good budget should have a hard minimum for total debt payments and savings. Read our budgeting post for a simple budgeting template that you can use to get started.

Call your creditors

As part of your budget-creating process, it’s probably worth seeing if any of your debt is negotiable. You’d be surprised how often creditors are willing to work out some kind of a plan that offers you a lower monthly interest rate. This is often easier when you’re still current on your payments.

Remember: creditors would rather get something than nothing, and they have a stake in keeping your payments up. So make it a point to pick up the phone and give your credit card issuer or bank a call to find out.

Pay more than the minimum

If you weren’t doing it already, make sure your new budget requires you to pay off more than the minimum balance on credit cards. If you’re only paying the minimum amount – usually about 2 or 3 percent of the balance – your debt reduction could take several years.

Check your next credit card bill for the information that tells you how long it’ll take to pay off that card if you only pay the minimum.

Consolidate debt when you can

Folding multiple credit-card and loan bills into a single loan with one monthly payment can help you manage your debt. Student loan consolidation involves taking the weighted average of all of the loan interest rates to determine a new monthly payment, which can often be lower than the combined payments for a borrower's federal loans. For student loan refinance and consolidation options check out our student loans page.

For credit cards, transferring to a lower-rate card can make sense. To entice new customers, some card companies offer a zero-percent teaser interest rate on balance transfers for a limited time amount of time. You'll typically pay about 3 to 4 percent of the balance as a transfer fee. But be careful: If you don't pay off the entire balance when the teaser rate expires you might be charged a much higher rate, sometimes more than 20 percent.

For more reading about whether debt consolidation makes sense for you read our debt consolidation post.

Plan your payment priorities

Even with a plan in place, it may not yet be possible to pay all your debts each month.

As you work toward that goal, keep in mind that all debt is not created equal. Focus on keeping current on secured debt – obligations like car loans and mortgages that are backed by property that you certainly don’t want to lose. Also, give a higher priority to debt related to must-haves like utilities as well as those you can't discharge, including student loans and unpaid federal taxes.

For credit card debt, there can be more than one way to go. Paying off the card with the highest interest rate first generally results in the lowest amount of interest paid. But if that balance is large, you might be waiting a while to whittle it to zero. Using the "snowball approach," you pay the minimum on the larger balances, and work on paying off the smallest balance first, you may end up paying more in interest, but you'll get a psychological lift from erasing each card's debt. And having open accounts with a zero balance might also help your credit score.

Read our 5 tips for erasing debt when you have limited income for more tips on how to pay off debt on a tight budget.