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Getting Out Of Debt

Few people can live completely free of debt. Many of us carry mortgages or have college loans to repay. Living free of debt does not mean avoiding a home mortgage or a college loan – those are investments that appreciate with time. Historically, home values have increased over time and have the advantage of providing income tax deductions as well. A college education makes you more marketable and more employable and leads to higher wages over time. These are examples of "good" debt because they help you build wealth.

"Bad" debt, on the other hand, detracts from your long-term needs and goals. Bad debt is financing something that goes down in value the minute you buy it. Examples of bad debt are using loans or credit cards to finance a lifestyle your income can’t support. Are you maxing out multiple credit cards and paying the required minimum amount each month? That’s a recipe for financial problems. Bad debt hurts your ability to build wealth.

A first step in getting out of debt is to stop charging your purchases. If you are not able to pay off your credit card balance each month, learn to pay with cash. Say no to impulse purchases, and buy only what you need. Concentrate on paying off the loans and cards that carry the highest interest rates, and work your way through all of your bad debt.

When you go to the market, stick to your shopping list and avoid the traps designed to entice you into buying what you don’t need. Everybody loves a sale, but if you’re paying 20 percent or more interest on the credit card, you haven’t scored a bargain. Even clothes you buy on sale are no bargain if they pile on more credit card debt.

Credit card companies entice consumers with teaser interest rates, or they send preprinted checks that are really high-interest rate loans. Those blank checks from credit card companies come with a high price, so it’s probably better to shred them as soon as you get them.

For more ideas on getting out of debt, see Managing Credit and Debt.

Products for this Life Stage:*

Provide short-term security.

As you work to reduce your debt, you can still provide your family with protection in the event you’re unable to provide for them. Term life insurance is a smart and affordable alternative.

Things to Consider When Dealing with Debt:

See what’s possible without debt.

Here’s some incentive to avoid debt: use our interactive Compare Savings Rates Calculator to see what’s possible when you’re saving more and spending less.

Get on track.’s Budget Calculator Tool can help you maintain sensible spending as you manage your debt.

Western & Southern Life does not provide tax or legal advice. Please contact your tax or legal advisor regarding your situation.

*Products suggested for this Life Stage are not a specific recommendation or solicitation to purchase.


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Last Updated: 12/14/2017