Over 77% of American households hold some amount of debt, according to data from the Federal Reserve. But how should households go about paying that debt down. Which strategies can help the most?
Crush Your Money Goals Founder & money coach Bernadette Joy joins Wealth! to break down her best strategies for paying down debt.
Joy breaks her budget into 3 parts: "It’s strive, revive, and survive." She follows that up with "Survive is half of your budget. I suggest that people try to aim for no more than half of their budget, going to their necessities and then splitting the other half of your budget between things that you want. Revive, so the happy things, the things that you enjoy spending money on, and then the other quarter of your budget that’s focused around paying off your debt and managing your savings."
When asked about how to differentiate between good debt and bad debt, Joy says "I actually don’t believe in good versus bad debt. I think all debt is debt and characterizing it more around how it makes you feel. So the simplest way that I tell people to focus on paying down debt is around the debt snowball," which is where an individual focuses on paying their smallest loan balances first.
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