Experts say tackling the smallest debt first can create momentum.
Experts say tackling the smallest debt first can create momentum.
The average U.S. household credit card debt stands at more than$15,000. Add that to the average mortgage debt — $154,000 — and the average student loan debt — $33,600 — and Americans are in pretty deep. In total, what Americans owe has increased 14 percent in the last year.

Financial advisors offer both common sense solutions and some tips that may be surprising.

“If you simply spend more than you make each month then there are behavioral issues to be addressed,” says Jim Schaller, owner of St. Johns Tax Service and a member of St. Ignatius Parish in Portland.  

Schaller often sees households who don’t budget well, perhaps because they are not disciplined or are counting on an inheritance. That is bad policy, he says.

To those who want to spend more that they have, he suggests an old-fashioned solution — get a second job, perhaps seasonal work like harvesting in the summer or working retail at Christmas.

“You will be tired but you will have added income to throw at the debt,” Schaller says.

Another common sense move: try to pay off the debt with the highest interest rate first. That’s the one costing you the most.

Here is Schaller’s counter-intuitive recommendation: pay off your smallest debt first, not your largest. Once that minor debt is gone, start using the money left over to pay off the next smallest debt. Work your way up. It’s like a snowball, with more money being picked up as you roll along.

“People who try to pay the biggest debt first never finish,” Schaller says.

He explains that the snowball idea is nothing new. Christian financial celebrity Dave Ramsey has been touting it on his radio show and others did so before him.

“Paying off the smallest debt first allows you to get some immediate, positive feedback — and encourages you to keep going,” Ramsey writes. “Once the debts start getting paid off, you’ll become addicted and stick with the program.”

Ramsey tells people not to dwell on mistakes from the past, since that saps motivation for the present.  

Catholic Answers, a website that takes up practical issues like finances, has experts who suggest personal bankruptcy only as a last resort. Those who see bankruptcy as a quick fix find it complicates life later, making it hard to borrow money.

Instead, the website says, cut out luxuries until the debt is gone. Stop buying on credit and save up for the items you want to purchase.

Experts counsel families to write down a budget and stick to it. Ramsey’s plan is to put budgeted money in envelopes marked for their purpose; when the envelope is empty, stop spending in that category. Stay away from places that tempt you to spend — malls, home improvement stores.

Ramsey and Catholic Answers discourage debt consolidation, since people end up paying about the same amount. They also issue warnings about companies claiming to clean up credit.    

Advisors say bill collectors will try to evoke strong emotions and try bluffing to get debtors to pay them before paying the mortgage or utilities. Resist their tricks, experts say. And be aware of the law.

Collectors cannot harass or call at odd hours. Despite what they say, they cannot garnish wages without first winning a lawsuit.
Many experts on Catholic Answers suggest prayer, which opens a person up to God’s prudence and clarity.

“St. Joseph is a strong advocate for the family,” one advisor said. “Involve him in your plans too,”