From Debt Stress to Debt Success: Smarter Ways to Pay It Off

liveyourmoneystyle
Jun 30
3 min read

Welcome back to Deeply Invested where we help you build a more confident, informed, and values-aligned financial life.

This episode kicks off the second of two conversations about debt - a foundational topic for anyone working toward financial freedom. If you've ever felt overwhelmed, confused, or even embarrassed about your debt, you're not alone. And we’re here to help you feel more equipped, not more ashamed.

You’re Not Alone: The Truth About American Debt

According to data from the Federal Reserve, TransUnion, and the U.S. Census Bureau (as highlighted in a Motley Fool article), the average American carries about $105,000 in debt, with total household debt reaching $18.2 trillion nationwide. A staggering 70% of this is tied to mortgages.

So if you’re carrying debt - whether it’s from a mortgage, credit card, or student loan - you are very much not alone.

Understanding Good Debt vs. Bad Debt

Debt often carries a negative connotation, but not all debt is created equal. Some types of debt like mortgages, student loans, and business loans can actually be strategic tools for building wealth.

Mortgages allow you to build equity and create new revenue streams through real estate investing.
Student loans may enable long-term career and income growth.
Business loans can help you fund something that generates value.

But on the flip side, there’s bad debt like particularly high-interest credit card debt, which can spiral out of control if not managed properly. Store credit cards, often bundled with tempting promotions, are one key culprit. What starts as a “deal” can quickly become expensive if you carry a balance.

Interest Rates & Fees: The Hidden Costs

It’s often not discussed exactly how interest rates work. Here are a few key takeaways:

Interest compounds daily. That means you’re charged interest on both your balance and previously accumulated interest.
If your APR (Annual Percentage Rate) is 20%, that’s divided across the year and applied every single day.
If you only pay the minimum payment (often 2–3% of your balance), it could take years to pay off your debt and cost you far more than the original expense.

Want to see it for yourself? Use Bankrate’s Minimum Payment Calculator to explore how long it could take to pay off a balance if you're only making the minimum payment.

Debt Payoff Strategies: Snowball vs. Avalanche

If you're looking to pay down debt strategically, there are two popular approaches:

1. Snowball Method

Focus on paying off the smallest balance first.
Make minimum payments on everything else.
This method gives you quicker wins, which can be motivating, but may cost more in the long run due to higher interest on other debts.

2. Avalanche Method

Focus on paying off the highest interest debt first.
It’s the most efficient and cost-effective method.
However, it may feel slower to start, especially if your highest-interest debt has a large balance.

The most important factor? Consistency. Stick with whichever method keeps you motivated and aligned with your financial goals.

BONUS: Download our free Get Out of Debt template to work through paying off your debt

Other Smart Debt Tips

Negotiate your interest rate. Call your credit card company and ask if they’re willing to lower your rate - especially if you’re a long-time customer.
Consider balance transfers. Look into 0% interest promotional offers, but read the fine print:
- Are there transfer fees?
- What happens when the intro rate expires?
- Will you be tempted to spend more on the new card?

And most importantly, celebrate your progress. Paying off debt is no small feat, and every step forward deserves recognition.

If you found this helpful, please share it with a friend, subscribe, and leave us a review. You never know who needs to hear this today.

Until next time, The Deeply Invested Team

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