Benjamin Franklin once said, “Rather go to bed without dinner than to rise in debt.” Americans must have missed that advice. We’re one of the most obese countries in the world and bathe in debt on a daily basis. Double-digit interest rate credit cards. Seven-year car loans. Six-figure student debt loads. McMansion mortgages. There seems to be no limit on how much debt some of us will take to the grave.
A new survey from CreditCards.com finds 21% of indebted Americans believe they will never pay all of their debts off before they die. That’s up from 18% last year and more than double the 9% response in 2013. The average American expects to be debt free by age 54, but 48% of indebted Americans say they’ll remain in debt until age 61 or older. Millennials, known as the student debt generation, are surprisingly more optimistic about their finances than any other age group, with only 11% claiming they’ll never be debt-free. Overall, 22% of respondents say they have zero debt, up from 14% a year earlier.
Not everyone is saddled with debt equally. Americans without children are more likely to say they’ll never get out of debt than parents in the survey (23% versus 17%). A bit unexpected since the cost of raising one child is now over $245,000. Twenty-four percent of whites say they’ll never get out of debt, compared to 16% of minorities who say the same. Interestingly, Republicans are nearly twice as likely as Democrats to believe they will die with debt.
“It’s a troubling divide,” said Matt Schulz, CreditCards.com’s senior industry analyst, in a press release. “While it’s great to see more people freeing themselves from debt, the fact that more and more people still feel trapped and hopeless means that Americans still have a major problem with debt. Hopelessness can be paralyzing, but the reality is that people have more power of their debt than they realize. The most important thing is simply to take action – even small ones – to start knocking that debt down.”
Living within your means and not having to worry about debt burdens is one of the most rewarding feelings. If you’re struggling with debt, CreditCards.com suggests you observe your spending habits by tracking expenses and making a realistic budget you can actually keep — needs should be placed over wants. You can also take steps such as transferring credit card balances to a lower-interest card in order to free up as much money as possible for debt repayment. Paying extra on your mortgage each month is also a great way to save thousands of dollars on interest.
If you are struggling with credit card debt or find yourself discouraged easily, try the snowball method, one of the most popular methods of debt reduction. Breaking conventional wisdom, this strategy ignores interest rates. You pay the minimum amount required on all credit card balances except the smallest. Place as much money as you can toward the smallest balance until it’s completely paid off. Then take the money you were using on that card to apply it toward the next smallest balance until that one is paid off too. Repeat this process until you have zero credit card debt.
Sending the majority of your monthly debt repayment to the credit card balance with the highest interest rate is more efficient, but it’s called personal finance for a reason. Some people need the satisfaction of paying off balances to keep them motivated. Use what works for you. Once you have zero credit card debt, adjust your budget so you pay off all credit card usage each month. This allows you to escape interest charges and build good credit.