According to the Federal Reserve Bank, the average household that carries consumer debt in America is now at $15,593.
It's about half that when averaged for all American households.
Let's face the facts: if you are carrying consumer debt, you are paying a high cost for borrowing money. If you eliminate that cost, you will radically improve your financial condition. As our late founder of Crown Financial Ministries, Larry Burkett, was fond of saying, "I have never met anyone who regretted getting out of debt."
Here are some practical tips for doing just that.
1. Take one bite at a time.
Here is some straight talk: Getting out of debt will require the following tools—patience, perseverance, a good plan and a healthy load of self-discipline.
For many, it will be like eating the proverbial elephant; it will require eating one bite at a time. To accomplish that, you need to start. That simple. Start. Then keep going. Persevere, persevere and persevere until the very last debt has been chewed up.
2. Melt the debt snowball.
To make the maximum progress, use the "Debt Snowball" method. List all of your debts on a single sheet of paper. List the amount you owe, the interest you pay on that debt and arrange them from highest interest rate to the lowest.
The higher the interest rate you are paying for your debt, the more important it is to get that one paid off first. Why? Because when it is paid off, you have freed up a lot more money to pay toward the next debt. For example, if you owe a credit card company $5,000 and are paying 14 percent interest and you owe $20,000 on a student loan that is charging you 5 percent interest, you should pay off the credit card company first.
3. Pay attention, not interest.
Let's say you set a goal to pay the credit card company off in 18 months by applying $275 per month to the reduction of your principle. When that debt is paid, you can now roll that amount into the debt with the next highest interest rate. Keep doing this until you get to the lowest interest rate. It's possible that by the time you get to the student loan, you could have almost $1,000 per month to pay toward getting rid of it.
4. Get God involved.
For the past 14 years, I have taught God's financial principles around the world. When Christians recognize that God's principles are His way of helping us thrive, they make a commitment to know and live by them. That draws them closer in their walk with Christ, and they experience the blessings of God's help in their financial decisions.
Proverbs 22:7 says, "The rich rule over the poor, and the borrower is a slave to the lender." This principle does not say that we can't borrow money; it simply explains that borrowing puts you in a position to be a servant to someone other than God. This is not a command, but a principle given for our benefit. God counsels us on how to avoid being enslaved.
Most people can become free of all consumer debt in approximately five years. So imagine yourself being out of debt by 2020. Seek God's advice and call on Him every step of the way.
Article courtesy of HomeLife magazine.