Bad debts are debts in which the payment term exceeds the benefits received from taking the debt. For example, paying for a vacation three years after the vacation is done. When we have bad debt it’s like we are forever caught up in the past. The issue of bad debt is one that befalls the average American. According to nerd wallet, the average American household debt profile is as follows:

• Average credit card debt: $15,611
  
• Average student loan debt: $32,264
  

The average paid in interest is $10,953.50 which is 21% of the average American income. The most recent report of the Federal Reserve Bank of New York’s Report on Household Debt and Credit, implies that the delinquency rate for student loan debt is increasing. Student loan debt grew by 7% making student loan slightly short of $1.2 trillion. While student loan debt grew by 7%, mortgage debt grew by merely 1.5%.

According to the last census data, the median American income is $53,046. An American who is debt laden has $10,953.50 cut off from their income just for interest payment alone. When you take into consideration the effect of taxes and inflation, the average American is left with approximately $24,000 to spend. This amount is not even enough to meet the average American living expenses. With statistics like this is it any wonder why most Americans dig themselves further into debt.

Compounding this problem, is the advertising we get bombarded with every day: There is always one more thing we need to buy to become an admired member of society. Moreover, as Americans we live in a near “cash less” society. Using debit cards, credit cards, automatic deposits, and wire transfers we rarely even see our money. It’s easier than ever to spend, spend, and spend!

No wonder people are so stressed. The average American is consistently spending about 10% more than they make. I am sure I have not said anything you did not already know. Having debt is very stressful and it decreases your ability to enjoy life. When you have more debt than you can handle, you feel strapped.

How do you get rid of debt? The answer easier said than done: Pay down what you currently owe while avoiding accumulating new debt.

To do this you will need to become “gazelle focused”, as stated by Dave Ramsey. Here are some quick tips that will help you increase the intensity of debt elimination tactics:

1. Find out what is making you overspend: do you overspend because of a poor self-image or trying to imitate the Joneses. If this is your issue, you will need to get some help with your mindset. Until you address the reason you overspend, you will always find yourself in debt.

    

   If the reason you overspend is just because you do not make enough money to meet your most basis needs, then you need to develop a plan for increasing your income. If you are 35 years old and still work at McDonalds as a server, think of increasing your skills so you are employable in other areas.

2. Focus on small wins: when I have a big task to perform, I break them down into milestones and celebrate each time I reach a milestone. The same principle applies to paying off your debt. Start by knowing how much debt you have and pay the smallest first. Each debt you pay off will motivate you to pay down more debt. Celebrating small wins should be a very important part of your debt payment strategy.
3. Reclassify purchases from needs to wants: While you are paying off your debt, you will need to cut off on those mindless expenses that we can do without. For example we can do without buying a $5 cup of latte every day.
4. Switch from credit cards to debit cards or cash: If you find yourself going out of control with your credit card, try putting it away for a while and use a debit card or cash instead.
5. Consolidate debt to a lower interest rate: I suggest this with caution because if you have not addressed what is making you overspend, you will end up in a worse situation.

Please do not be a statistic: I understand that there are forces consistently working to keep us in debt, but we have to be smarter. You cannot afford to be mindless in today’s society because the tides will take you where you don’t want to go. Getting out of debt is a struggle and is a fight you have to take on if you intend to build a financially sound future.

Remember, celebrate your small wins and NEVER give up hope. Financial security for most people is never one big step but a bunch of little ones in the right direction. Every dollar you pay on your debt rather than spending mindlessly does add up. So never give up, even when it looks like you are not making progress.

Proverbs 22:7 the rich rules over the poor, and the borrower becomes the lender’s slave.