Debt Management: Foundational to Financial Success

Last updated: January 2, 2019

Managing Money Better is #Goals for Many

Determinations and public declarations to “do better” abound at this time of year, and according to a YOUGov poll conducted last year, 37% percent of people reported that their New Year’s Resolutions involved goals for their personal finances.

You may be among those who plan to work your way toward financial success. Much of what you may hear and read may emphasize “saving and investing” to create wealth. But equally important is the strategy of “debt management” and “debt avoidance” in your financial life.

An article on last year revealed that most Americans are in debt:

80.9% of Baby Boomers

79.9% of Gen Xers

81.5% of Millennials

Mortgage, student loan and credit card debt top the list of the liabilities. While the first two debts are generally considered “good debts” and usually carry low, fixed interest rates, research reveals that the average annual percentage rate (APR) for credit cards in 2018 was 17%, making debt pay-off challenging when the card holder maintains a balance. (

Unnecessary and especially prolonged debt can stymie your ability even to meet monthly obligations. If you are in debt, you can begin putting your financial house in order this year by taking the following steps:

1) For one month, track all your expenses – fixed, (rent, mortgage, utilities, car loan, credit card payments) and variable, (cup of coffee, lunches out, gym membership, etc.).

2) Eliminate or substitute the variable expenses for cheaper alternatives. For example, pack a lunch instead of eating out at work, make your coffee at home, or jog around the neighborhood. Put saved monies toward paying down debt. 

3) Review your fixed expenses for possible reductions. For example, re-finance your mortgage to a lower interest rate or pay off your car loan or large credit card debt with a home equity line of credit at a lower interest rate.*

Can’t get a home equity line of credit? Prioritize debt from the highest to lowest interest rate. Put as much as you can toward the monthly payments on the higher interest cards while maintaining the minimum balance on others. Once you pay off the highest card, repeat with the next highest interest rate card until credit card debt is eliminated or under monthly payoff control.

Alternatively, debt guru Dave Ramsey suggests eliminating smaller debts, because you can do these much more quickly. The psychological boost you get from the small successes will spur you to tackle bigger and bigger debts with greater drive.

4) Build an emergency fund. Even if it is only $1,000, this can free you from dependency on a credit card for sudden expenses.  Over time, build an emergency fund that equals six months of your salary.

Tracking your expenses and keeping debt manageable are essential to building personal wealth. Benjamin Franklin may have summed it up best when he wrote in Poor Richard’s Almanac, “A penny saved is a penny earned.” His financial advice, as any financial professional will tell you, is as true today as it was in 1737.


*A home equity line of credit (HELOC) is a second mortgage that gives you access to funds based upon the equity in your home. Securing debt with your home may have consequences.

Photo by Annie Spratt on Unsplash