As everyday living costs increase, many U.S. households are facing financial struggles. Unfortunately, many Americans have significant debt, which continues to grow. It may shock you to know how much debt the average American has. To better understand the problem, let's review some debt stats. I'll share some tips on what you can do to eliminate your debt sooner.
Americans carry a combined total of nearly $18 trillion in debt
Recent research by The Motley Fool Ascent explored the average American household debt. The study examined data from Experian, the Federal Reserve, TransUnion, and the U.S. Census Bureau.
Unfortunately, debt is a problem for many Americans. Data shows that in the first quarter of 2024, Americans had $17.987 trillion in debt. Sadly, consumer debt has continued to grow in recent years. Total consumer debt has increased by more than $2.5 trillion since 2020.
That's an alarming amount of overall debt, but how much does the average American have? In 2023, the average American household had $104,215 in total debt. This included various accounts, like auto loans and credit card debt.
Here's how much Americans are spending on debt
Many Americans want to pay off their debt, but it can be difficult to do that quickly. Rising living costs make it harder for the average American to afford to prioritize debt payoff.
The Federal Reserve tracks household debt payments based on a percentage of disposable income. In the fourth quarter of 2023, Americans' debt-payment-to-income ratio was 9.8%. This figure shows that Americans spend nearly 10% of their monthly income on debt payments.
Tips for eliminating debt faster
If you have outstanding debt, you're not alone. If you're concerned about the amount of debt you have, here are some tips that can help you tackle your debt sooner.
1. Establish a debt payoff plan
It's understandable if you're feeling overwhelmed about your debt. It's a scary feeling to owe creditors while also keeping up with your household bills. The best thing you can do is be honest about your debt. It's worthwhile to start by outlining all of your debts.
Write down the total debt amounts, the interest rates, and the minimum payment amounts due each month. This will give you a clear picture of your debts and help you formulate a plan to pay them off. Your options include snowballing your debt (focusing on paying extra toward your smallest balances first) or creating a debt avalanche (focusing on the debt with the highest interest rate first). If you need help following your plan, one of the best debt payoff apps may help.
2. Consider a balance transfer credit card for credit card debt
If you have a sizable amount of credit card debt, you may want to explore getting a balance transfer credit card. These credit cards promote an introductory 0% APR on balances transferred from another card for a set time.
As long as you pay the transferred debt off within the time period, you'll avoid additional interest charges. Keep in mind that you'll likely pay a balance transfer fee of around 3% to 5%, but stopping interest growth could make it possible to pay off your debt faster.
3. Explore ways to boost your income
Eliminating debt quickly can be difficult when you have limited income. You may want to explore ways of boosting your income. Options could include asking for a raise, starting a side hustle, or looking for a better-paying job while continuing to work in your current role.
It can take time to increase your income, but a boost could afford you the ability to put more money toward your debt. The sooner you pay down your debt, the less interest you'll pay.
Don't give up hope
No matter how much debt you have, remember that you're not alone in your financial struggles. Any progress that you're making is worthwhile. As you continue your debt payoff journey, give yourself credit for all your hard work. And most importantly, don't give up. You can do it!
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