1. Americans are anchored by credit-card debt.
According to CardWeb.com, the average American household with at least one credit card has nearly $10,700 in credit-card debt. Even more alarming, the average interest rate on these cards runs in the mid to high teens.
2. Yes, there is such a thing as good debt.
Borrowing for a home or college is a useful necessity. Just make sure you don't borrow more than you can afford to pay back, and always shop around for the best rates.
3. But most debt is bad.
If you can't afford to pay off your monthly bill in a month or two, don't use credit cards to purchase things you consume quickly, such as meals and vacations. It’s the quickest way to fall into debt. Instead, put cash aside each month for these items and pay bills in full. If there's something expensive you really want, save for it over a period of weeks or months before charging it. That way you can pay the balance when it's due and avoid interest charges.
4. Control your spending.
Most people spend thousands of dollars without actually thinking about what they are buying. Log all of your monthly spending, cut back on things you don't need, and start saving the surplus or put it towards reducing your debt
5. Pay off your highest-interest debts first.
First pay down loan balances and/or credit cards with the highest 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. Pay more than the minimum.
Don’t just pay the minimum due on credit-card bills. You'll barely cover the interest you owe, and good luck trying to cut into the principal. It could take you years to pay off your balance, and you'll likely end up spending thousands more than what you originally owed.
7. Watch where you borrow.
It may be convenient to borrow against your home or your 401(k) to pay off debt, but it can be risky. Worst-case scenario, you lose your home or fall short of your investment retirement goals.
8. Always be prepared.
Build a three to six-month cash cushion worth three of your living expenses in case of an emergency. Without an emergency fund, unforeseen expenses can cripple your finances.
9. 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 may 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.)
10. Get help right when you need it.
If you have more debt than you can manage, get help before it breaks you. There are reputable counseling agencies that can help consolidate your debt and assist you in managing your finances. But make sure you do your homework; there are also a lot of disreputable agencies out there too.