If you’re dealing with debt, you’re far from alone. More than 80% of U.S. households carry some form of debt (2025 Federal Reserve report), and since 2019, total household debt for Americans has increased more than 31%, to $18.59 trillion.
While debt can help you achieve important goals, such as buying a home or getting an education, it can also create strain on your life and finances. If you only make minimum payments, for example, you’ll hold debt longer and pay more in interest.
Having a clear debt reduction plan can help you take control, reduce anxiety and even save money.
Know your debt. The first step is understanding what you owe. Make a comprehensive list of all your debts, including credit cards, mortgages, auto loans, student loans and medical bills. For each one, note the total amount owed, the interest rate and your minimum payment requirements.
Next, add it all up to see your total debt load. Then calculate your debt-to-income ratio by dividing your total monthly debt payments by your gross monthly income. A good rule of thumb is to keep this ratio below 35% if you have a mortgage or 20% if you don’t.
Manage what you owe. Now that you have the big picture, look for opportunities to reorganize your debt more effectively. Perhaps you can refinance existing loans at lower interest rates, consolidate multiple debts into a single payment or transfer high-interest credit card balances to cards that offer lower or 0% introductory rates for up to 12 months.
These strategies won’t reduce the total amount you owe, but they can make your debt more manageable and potentially save you money on interest. Just watch out for fees and make sure you understand new terms before making changes.
Set your payment target. Start by identifying your required minimum payments across all debts. Missing these can trigger fees and penalties and damage your credit score, so treat them as non-negotiable expenses in your budget.
Next, look at your budget to identify any funds available after covering all essential expenses. Consider how much of this surplus to put toward paying down debt versus saving for other goals. Remember that building an emergency fund and saving for retirement are also important priorities that shouldn’t be sidelined.
If you have no surplus, you may need to cut back on things like eating out, clothes shopping, on-line subscriptions, entertainment or expensive vacations while you bring your debt in line. Consider an additional part-time job for extra income to pay off your debt sooner.
Prioritize your debt. Finally, decide which debts to tackle first with any extra payments. One approach is to focus on paying off the debt with the highest interest rate first, which minimizes the total interest you’ll pay over time. Alternately, you can target the smallest balance first to help you build momentum and motivation.
Taking control of your debt doesn’t happen overnight, but with a clear strategy, you can make steady progress toward your financial goals.
This article was written by Edward Jones for use by Joe Oliver, your local Edward Jones Financial Advisor.
Edward Jones, Member SIPC
Joe Oliver is a lifelong Oxfordian, husband, father, and financial advisor with Edward Joes Investments. Joe services business owners and individual investors by helping them accomplish their financial goals. For a complimentary financial consultation, connect with Joe at Joe.Oliver@Edwardjones.com.
Joe Oliver, CFP®,AAMS™
Financial Advisor
2250 Baltimore Pike
Oxford, PA 19363
484-702-9311
www.edwardjones.com/joe-oliver
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