Americans are carrying nearly $19 trillion in household debt, including more than $1.2 trillion in credit card balances alone, according to data from the Federal Reserve Bank of New York.
For consumers feeling the squeeze, financial expert Ted Rossman say getting out of debt starts with understanding where your money is going, and avoiding strategies that simply move debt from one place to another.
For consumer John Peran, staying out of debt starts with prioritizing spending.
“If you have a good thought process to know what you need against what you want, then you balance out your life,” Peran said.
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Abraham Hamdan says that can be increasingly difficult for younger Americans facing higher everyday expenses.
“It's just with the economy nowadays, it's kind of hard to blame the kids for getting into debt when everything is so expensive,” Hamdan said.
Ted Rossman, Principal Consumer Finance Analyst with Money Management International, a nonprofit credit counseling organization, says the organization is seeing increasing demand for help.
MMI says its financial counseling sessions have increased for five consecutive years, while enrollment in its debt management plans has reached a 10-year high. MMI’s average client has $28,000 of credit card debt.
“A lot of people are wrestling with high expenses, budgets that are just not working anymore,” Rossman said. “Even if you're working, and even if you get a raise, for many, it's just not enough to keep pace with the rising cost of living.”
Rossman says many people seeking help aren't necessarily struggling because of discretionary spending.
“Medical debt is a huge one. Twenty percent of our clients say that medical debt is the main reason they're contacting us,” Rossman said. “We also see a lot of home repairs, car repairs, job loss, divorce, groceries, just everyday things.”
Rossman's first piece of advice for people trying to dig out of debt is simple: face the numbers.
“We don't want to hide from credit card debt,” he said. “It's not going to go away on its own.”
That means taking inventory of what you owe, looking at where your money is going, and considering both sides of the household budget: expenses that can realistically be reduced and opportunities to increase income.
For some consumers, that could mean making difficult short-term changes.
Will Hughes said getting out of debt once meant taking a second job.
“It's taking a hard look in the mirror and saying, I'm going to have to suffer for a small time for the benefit of a long time,” Hughes said.
Debt consolidation can appear to offer a simpler way out, but Rossman cautions that taking out another loan does not solve the underlying problem if spending and income remain out of balance.
MMI says 45% of its clients now come to the organization carrying personal loans. Rossman says some consumers have used personal loans to pay off credit cards, only to build their card balances back up afterward.
“We don't want to just play a shell game and kind of move money around and pay off debt with more debt,” Rossman said. “You have to adjust the underlying factors as well.”
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The debt burden also varies significantly by generation.
A LendingTree analysis of roughly 400,000 anonymized credit reports found median non-mortgage debt of nearly $17,000 across the large U.S. metro areas studied.
Gen X carried the highest balances, at nearly $25,000, followed by millennials. The analysis included debt such as credit cards, auto loans, personal loans and student loans, but excluded mortgages.
As consumers search for solutions, Rossman says MMI has also seen an increase in people finding its services through artificial intelligence platforms, particularly younger consumers.
He believes AI can be useful for certain tasks, including helping consumers analyze where their money is going.
“I actually feel like AI can be a useful tool for people to analyze their spending,” Rossman said. “There's other methods too. I mean, even just an old-fashioned spending journal or combing through your credit and debit card statements. Look where your money's going.”
But Rossman cautions against automatically following financial advice generated by AI. Personal finances can vary considerably depending on a person's income, expenses, debt, family situation and financial goals.
Instead, he says consumers can treat AI as a starting point while reviewing their own numbers and seeking individualized help when necessary.
For Peran, managing money ultimately comes back to planning and balance.
“If you plan your life, you can afford to do at least half the things you want to do,” he said. “Be mindful of where you are in your life.”
This story was reported on-air by Jane Caffrey with the Scripps News Group in Phoenix and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
