Breaking free from the cycle of debt

STATS STACK 🥞

$495,750 is now the median price for a new home, according to the National Association of Home Builders, which has priced out 77% of U.S. households. In contrast, the Census Bureau reports that the median household income stands at $80,610. (Source: NAHB)

0.9% is the average loss U.S. large-cap stocks have experienced in September since 1926, according to Morningstar Direct. It's the only month during that nearly century-long period where investors faced an average loss, while all other months showed a profit. (Source: MSNBC)

497,000 is the new number of 401(k)-created millionaires this quarter, a 2.5% increase from 485,000 in Q1. Similarly, IRA-created millionaires grew by 6%, rising to 398,594 from 376,275. These individuals achieved this milestone by starting early and consistently contributing to their retirement savings over the years.(Source: Fidelity )

DEEP DISH 🍕

Breaking free from the cycle of debt

In today’s society, it’s become easier than ever before to purchase things without truly having the money to buy them outright. Some of the main culprits of consumer debt are credit cards, car loans and student loans.

Credit cards

Credit cards have become so prevalent in society that reportedly over 80% of American adults own at least one credit card. Don’t get me wrong, if used wisely, credit cards can help propel your financial journey. After all, it can help you build your credit and earn reward points. However, many Americans don’t really manage their money well.

If everyone paid off their credit card balance in full each month, the $100+ billion credit card industry would be in jeopardy. But unfortunately truth is that this is not the case. Many people often have outstanding balances on their credit card and can only pay the minimum payments each month.

Because credit cards often have some of the highest interest rates, on average 21%, just paying the minimum payments each month could lead to a detrimental, never ending cycle in which the amount owed balloons out of control.

Car loans

Most people I know want a car, a nice car to be more exact. But when you go to the car lot and see that $40,000 price tag, you may want to walk way. No thanks to car loans, consumers have the ability to purchase cars using a car loan. The Average car payment for a used car is $500 per month and for a new car is $700 per month.

Though on the surface, $700 per month may not seem like much, it’s important consider the long-run impact that that payment can have on your financial health. For instance, over the life of that car loan payment, you could be paying thousands of dollars in interest. As soon as you drive that new car off the lot, the car depreciates in value. Most Americans cannot afford an unexpected $500 emergency.

Student loans

Going to college and obtaining a degree is part of the American dream. But this American dream comes at a steep price. College tuition, for both private and state schools, have doubled over the past decade.

High school students are often encouraged to finance college through student loans but are not adequately educated on how to pay off their student loans once they graduate. As a result, student loan borrowers in the US owe a collective $1.7 trillion dollars. The average student loan debt, for a bachelor’s degree, is nearly $30,000

As a result, many Americans enter the workforce with a negative net worth and face a steep upward hill to climb. Once you’re able to eliminate consumer debt from your life, you will be in greater control of your money and can start accumulating true wealth. Imagine a world with no credit card payment, no car notes and no student debt.

Once you’re able to achieve that, you’ll feel like you got a raise without a change in your paycheck. Additionally, you’d be in a position to build a healthy 6 month emergency fund for when life happens. Especially in this economic climate we’ve often heard of others who are going through trying financial situations:

• Loss of income

• Unexpected home or auto repair

• Sudden illness that negates the ability to work full time or leads to high medical bills

• Paying off debt isn’t easy, but it’s always worth it

Here are some things you can start doing to reduce your debt burden:

1. Don’t incur more debt

2. Create a budget to track your expenses

3. Review your bills in full and identify ways to reduce your expenses

4. Speak with creditors about repayment plans

5. Pay off debt by prioritizing high interest debt or starting from lowest amount owed to highest amount owe

Breaking free from the cycle of debt isn’t easy, but it’s one of the best gifts you can give yourself. Imagine the freedom of living without credit card payments, car loans, or student debt hanging over your head. You'll feel like you've gotten a raise without even changing jobs! Once you're debt-free, you can finally build that 6-month emergency fund for life's unexpected twists. It’s all about making small changes today that lead to financial security tomorrow. With dedication and a plan, you can reduce your debt, build wealth, and set yourself up for a more secure future.

SWEET LINKS 🍰
Digital bites we think you’ll like

Holiday spending hacks — A recent Bankrate survey shows that 1 in 3 people plan to spend less this holiday season, and many are getting a head start on shopping to score some good deals! We love this approach—having a spending plan for the holidays can really help avoid that post-holiday financial hangover in the new year.

Election spending trap — There’s a really interesting piece in the Wall Street Journal about how “election fatigue” is leading some people to overspend. While this might not be everyone's situation, it’s a great reminder not to let politics—or any major headlines—mess with your finances. Focus on the things you can control!

Expensive fight night — The UFC spent $20 million to put on its first live sports event at the Las Vegas Sphere—8 to 10 times more than they usually spend. But Dana White expects to make it back with $22 million in ticket sales, and fans are shelling out around $1,700 on average for resale tickets. And it's not just for the fights—the Sphere’s display will feature animations and a special six-part film celebrating Mexican culture between matches.