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How to get out of debt — and stay that way

Debt can quickly sneak up on a person. However, it can take much longer — sometimes decades — to get out of debt. And that’s a big concern when considering just how much debt the average person has incurred.

Northwestern Mutual’s 2018 Planning & Progress Study says the average American has about $38,000 in personal debt, excluding home mortgages. These tips can make it easier to get rid of debt.

Stop the flood

Avoid new debt at all costs. Stop using credit cards, cease taking loans, do not buy any big-ticket items, and scale back on general purchases.

Learn about avalanches and snowballs

The avalanche method is a way to pay off debt. According to NerdWallet, a popular online financial resource, the debt avalanche approach encourages debtors to pay off debts with the highest interest rates first. That seems like an effective way to get out of debt quickly. However, in a 2016 investigation for the Harvard Business Review, researchers found that the snowball method, which prioritizes paying off the smallest debt balance first and then moving on as debt amounts increase, is the most effective strategy. It tends to have the most powerful effect on people’s sense of progress because they gain momentum by watching debts disappear.

Cut back temporarily

Cut back nonessential spending, such as cable subscriptions or gym memberships for the time being. Repurpose that extra money to pay off existing debt.

Get a lower interest rate

Customers can call customer service centers to see if they can lower debt by negotiating a better interest rate, says Credit.com. Since much of a credit card payment goes toward monthly interest charges and not toward the actual balance, this can be a way to get a handle on debt. Some people prefer to use a balance transfer to get a lower rate on another card and try to pay off the balance before the promotional rate expires.

Consolidate or settle

When debt is so substantial that debtors cannot see the light at the end of the tunnel, they might ask a creditor to accept a one-time, lump sum payment to satisfy the debt. Debt consolidation companies also can help by negotiating with creditors and streamlining debt into one payment per month instead of many.

With an effective plan in place, people in debt often can dig themselves out of financial peril.