Debt Consolidation: How Much Do You Really Owe?

Jeanne McTaggartDebt Consolidation

Debt Consolidation

Don’t get Buried in Borrowing

When you’re in the habit of borrowing money to pay for regular expenses, it becomes easy to justify pulling out your credit card. “It’s just a hundred dollars. I can have that paid off in no time.” “Oh, but I really want to have this now, even though payday is still a week away.” “Well, I’ll just pay the minimum amount this month. I’ll take care of more next month.”

The Average American Debt

Do these statements sound familiar? Debt adds up in small amounts over time. Most people don’t routinely charge purchases worth several thousand dollars to their credit cards, and yet among debt-carrying American households, credit card debt is estimated to be an average of $15,000.

This means that many Americans are carrying a greater debt than they realize or intended. It adds up in small amounts and continues to be paid out in small amounts. There’s a thousand dollars owed on this store credit card. The card you use for groceries when you run a little bit short, or gas at the end of the month, has a few thousand on it, since you’ve gotten behind on payments. The card that you only use for “emergencies” has a thousand or two on it from the last car repair. You’re paying on all of these cards each month, but they’re spread out across the month so that you aren’t forced to look at the true amount of the debt.

The number might surprise you. Not only that, looking at that number all at once forces you to acknowledge how long it will really take you to pay off your current debt. If you assume an average household income of around $50,000 per year to go with your $15,000 of debt, it would take almost a third of your income for a year to pay off your debt. When you factor in your other bills–a car loan, for example, or the mortgage on your home–debt may be taking up more of your income than you can afford to lose.

Debt Consolidation

In many cases, debt consolidation is a wake-up call. It helps you to see what you really owe and make more responsible choices in the future. You don’t want your debt to outweigh your income, and transitioning to a simpler lifestyle is well worth the effort to help you get out of debt and stay that way.

Do you want to know more about debt and how you can make smart financial decisions now that will help you secure a more prosperous financial future? Sign up for our newsletter for monthly money tips.

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