Having debt is a fact of life.

According to Northwestern Mutual’s 2018 Planning & Progress Study, the average American has about $38,000 in personal debt, excluding home mortgages.

But how do you manage your debt to ensure it doesn’t suffocate you?

Emily Braun, a financial adviser at Edward Jones in Solon, and Randy Carver, president of Carver Financial Services in Mentor, said the first step is knowing where you stand financially.

“First identify what debt you have and what the interest rates are,” Carver noted. “Then focus on paying off the highest interest first. If you have equity in your home, consider doing a mortgage refinance and using the cash to pay off high-interest debt. Mortgage rates are at historic lows today, so this is a good time to consider consolidating debt.”

Braun suggested developing a financial strategy.

“Develop a solid financial strategy based on your goals and stick to that plan,” she said. “Create a budget and stick to it. It can also be helpful to get an accountability partner.”

Individuals should also consider the type of debt they may be facing. Carver explained there can be “good debt” and “bad debt.”

“‘Good debt’ is generally things that appreciate over time and ‘bad debt’ is things that depreciate,” he explained. “Running up credit cards for frivolous things like eating out, etc., that would be considered bad debt. A mortgage that you can afford would be good debt.”

When starting one’s debt management journey, beginning on the right foot can make a difference.

“When you are in a hole, the first thing to do is to stop digging,” Carver said. “In other words, if you have a large amount of debt, the first thing to do is figure out what is causing it and see if you can adjust your budget so it doesn’t get worse.

“Understanding your debt is also important as you will want to pay off the highest debt first. It is important to be honest with yourself about what debt you have, how much you are spending and how much you can save.”

The debt management journey also depends on the end goal, Braun said.

“How much time will you have to achieve the goal?” she asked. “What trade-offs are you willing to make? And with long-term goals, like retirement, that’ll be a little different. You might need to ask how much return and risk you’re willing to take. I think that is a really good starting point.”

To truly understand your debt management journey, Braun said it is imperative to track your progress.

“Everything you do, all of your strategies, it is all meaningful,” she said. “And if you’re lagging, you might need to explore new ways to get back on track. It’s all about creating those habits.”

Seeking professional help for debt management isn’t a bad way to go. But, it is important to know the type of professional you need to engage.

“There are certified financial planners that will help manage debt as part of a holistic plan,” Carver noted. “It’s important to understand the credentials of someone calling themselves a planner and how they charge for their services. There are many debt and loan consolidating services that ultimately could cause more harm than good.”

If you’re considering filing bankruptcy, it’s key to contact an attorney who specializes in that area. Braun said she can also guide her clients through their goals and how debt could affect that.

“It is so great to get to know my clients and learn what is important to them as everyone has something they are working towards,” she said. “Many people have financial goals, like a comfortable retirement, taking a long vacation or saving for college. But a financial professional is someone who has the perspective, experience and skills necessary to help you make the right move.”

Though it can seem like you’ll forever be in debt, the professionals suggested not getting discouraged by the struggle.

“Be honest with yourself about what you need, how much debt you have and how much your income is so you can develop a plan to pay off the debt and have a real budget,” Carver said.

Braun said, “Know that trying to achieve too many goals, whether that is debt management, retirement or anything like that, is a daunting task. Just follow a clear strategy and be willing to prioritize, accept that trade off and get the help you need.”

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