-- In November 2018, the Federal Reserve Bank of New York published its third-quarter report on U.S. household debt and credit, revealing that total debt levels had surpassed the previous record set a decade earlier.
With an additional $219 billion added, total household debt reached $13.51 trillion, marking the 17th consecutive quarter of growth and standing 21.2% above the post-crisis low recorded in mid-2013. While high national debt levels are often viewed with concern, they can also reflect positive economic signals, as increased household borrowing may indicate confidence in future financial stability. Furthermore, the ability of U.S. consumers to repay their debts has improved considerably since the 2008 financial crisis, supported by low interest rates and steady economic growth, according to a report by Moody’s Investors Service. Despite these improvements, many households still struggle to manage multiple financial obligations, often balancing mortgages, credit cards, student loans, auto loans, and personal loans at the same time. Financial expert Anthony Joseph Amaradio notes that choosing the right repayment strategy can significantly reduce financial stress and help individuals eliminate their liabilities more efficiently.
There are several well-tested methods for dealing with financial obligations, and while most borrowers are probably aware of them, they find it difficult to select the one that best aligns with their goals. The so-called snowball and avalanche strategies are perhaps the best-known options, the first factoring in the amount to be repaid and the second focusing on interest rates, with payments prioritized based on these parameters. With the snowball approach, borrowers start by eliminating the lowest balance and proceed upward, while the avalanche method involves the repayment of debt with the highest interest rate first and moving down the ladder. With credit card loans, in particular, a combination of the two can be implemented, this hybrid approach having certain benefits from a psychological point of view: as a study by the Harvard Business Review and HelloWallet found, morale is a critical motivator in debt repayment. Households dealing with multiple loans can benefit from a debt consolidation strategy, which not only simplifies matters but can reduce the interest rate for those with a good credit score.
While borrowers have many options, it can prove difficult to select the right one, especially since people are motivated by different things, Anthony Joseph Amaradio points out. The snowball strategy would be suitable for those who are psychologically rewarded by immediate progress, while the avalanche method is for people concerned about costs or dealing with a large amount of high-interest debt. The hybrid approach offers the desired “quick win” but can also lead to substantial savings, whereas debt consolidation may not be possible for people with an impaired credit history. Since multiple factors come into play, the best course of action is to seek the advice of an expert debt consultant, who can evaluate all aspects of a given financial situation and recommend the optimal strategy.
Financial expert and dedicated philanthropist Anthony Joseph Amaradio is the founder and chief strategist of Select Portfolio Management Inc and Select Money Management Inc, where he employs an innovative integrated strategy to maximize results for clients. Earning his BBA from the University of Michigan and an MBA from the University of Detroit, Amaradio commenced his career in the financial services industry. Passionate supporters of charitable causes, he and his wife Carin, are often invited to speak at events hosted by non-profit organizations, many of which rely on his expertise to optimize their capacities and thus improve their effectiveness.
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