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1. Americans and their credit card debt. The average American household with at least one credit card has nearly $9,200 in credit card debt, according to CardWeb.com, and the average interest rate runs in the mid- to high teens, at any given time.

2. Some debt is good.  Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates. Good debt is also classified as a debt in which you can write off the interest as a tax deduction.

3. Some debt is bad.  Don't use a credit card to pay for things you consume quickly, such as meals and vacations, if you can't afford to pay off your monthly bill in full, in a month or two. There's no faster way to fall into debt. Instead, put aside some cash each month for these items, so you can pay the bill in full. If there's something you really want but it's expensive, save for it over a period of weeks or months before charging it so that you can pay the balance when it's due and avoid interest charges.

4. Keep your spending under control.

  Most people spend thousands of dollars without much thought to what they're buying. Write down everything you spend for a month, cut back on things you don't need, and start saving the money left over or use it to reduce your debt more quickly.


5. Pay off your highest-rate debts first. The key to getting out of debt efficiently is to first pay down the balances of loans or credit cards that charge the most interest, while paying at least the minimum due on all your other debt. Once the high-interest debt is paid down, tackle the next highest, and so on.

6. Don’t just pay the minimum! If you just pay the minimum due on credit card bills, you'll barely cover the interest you owe, and very little goes to the principal. On average it takes 12 to 15 years to pay off your balance using the minimum and doing this you'll end up spending thousands of dollars more than the original amount you charged.

7. Expect the unexpected, in other words be prepared! Build a cash cushion worth about three months to six months of living expenses in case of an emergency. If you don't have an emergency fund, a broken furnace or damaged car can seriously upset your finances.

8. Don't be so quick to pay down your mortgage. Don't pour all your cash into paying off a mortgage, if you have other debt. Mortgages tend to have lower interest rates than other debt, and you can deduct the interest you pay on the first $1 million of a mortgage loan. (If your mortgage has a high rate and you want to lower your monthly payments, consider refinancing.)

 


 

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