July 29, 2014
A recent study from the Urban Institute says that one in three adults have a report of debt in collections. Meaning a non-mortgage bill, like a credit card balance or a medical bill, is more than 180 days past due.
Nearly 77 million adults on average owe nearly $5,200 dollars.
Local financial planner David Barrett-Johnson says there's no easy way to get out of debt, but you should pay off your higher interest rates first.
“You always want to make the interest payment as low as it can be,” says Barrett-Johnson. “One of the primary ways to do that is to have a home equity line of credit, which will be a very low interest rate and a tax deductible way of borrowing.”
“You want to use that to pay off high interest rate and nondeductible debt.”
He says things you should be borrowing money for are to buy a house, car, business or education.
“Borrowing money for a vacation, borrowing money for an x-box, borrowing money to go out to eat, those are not reasonable things to borrow money for,” says Barrett-Johnson. However, most Americans do according to the study.
But he feels that there is a bigger issue at hand.
“Making the decision that you aren't going to be a slave to your lifestyle, that you are going to take control of your life by saying I'm going to find my happiness and find my significance in something other than where I got out to eat, where my house is, how nice my car is and what school I send my kids to.”
To start saving money, Barrett-Johnson says you can begin by cutting back on things like the cable bill, and a land line, when you have a cell phone.
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