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Of all the four-letter words, debt may just be the worst. Nothing conveys dread and hopelessness quite like the idea of owing money. But for many Americans, are making debt increasingly tough to avoid. Everything from eggs to your car loan costs more, and with for credit cards averaging around 20%, plenty of people are not only paying more for things, they’re paying more to pay off their credit card balance too.

According to a recent , 35% of American adults carry debt each month, and for 31% of millennials who do so, day-to-day expenses are why.

The disheartening truth is credit card debt was actually declining year over year until the end of 2022, when inflation and high interest rates helped catapult .

If you can relate, read on for a closer look at the debt landscape and how to paint a prettier picture with your own finances.

Different types of debt

��������ʿ�����¼ (UOPX) emphasizes financial literacy in its coursework, and it’s a subject close to the heart of Chris Conway, the director of financial wellness at UOPX. Conway facilitates a class that makes financial literacy an attainable skill for students. Those classes are also opportunities for Conway to see what resonates with students and where they could use more help.

“I’ve had many students in the Everyday Economics and Finances course say if they better understood how credit and debt work, they wouldn’t have opened credit card accounts,” Conway says. “Lack of finance education doesn’t make you fall into debt, but if you’re unaware of the consequences, it can be easier to fall in.”

Those consequences, such as facing steep payments after , are part of why credit card debt is a stressful reality for many adults.

Debt also happens for other reasons, such as:

• Job loss
• Divorce
• Medical costs
• Life events (including births, deaths and adoptions)

Some of these factors are circumstantial. Medical debt, for example, plagues 9% of U.S. adults, with those in lower income brackets hit hardest.

Then there are economic conditions like high inflation and low unemployment, which set the stage for predatory lending. Payday loans, for example, offer money against future earnings and without a credit check — but at an interest rate over 500%. So, low-wage earners who need money to cover increasingly expensive daily costs like food and gas often find themselves effectively .

5 steps to manage (or get out of) debt

While the clouds of economic uncertainty loom, there is a silver lining: It is possible to manage or even get out of debt. According to Conway, here’s how.

1. Reduce and remove costs

As much as possible, reduce your regular expenditures to create a little extra cash you can apply toward paying down your debt. Maybe you do so by buying generic instead of brand-name groceries, suspending your Netflix account for a while or canceling your kids’ gymnastics lessons for a few months.

2. Earn a little extra

While not possible for everyone, taking on extra work can be a good option for those who have the time and skill to pursue opportunities for additional income. This might be freelance work, a side business or even a second job on weekends to give your income a boost.

3. Contact your credit card company

It never hurts to ask for what you want, including a lower interest rate. But don’t do it blindly. Make sure you know exactly what your current terms are (including your APR and current balance) and research other card terms to know what’s available. Then, bring that information to your credit card company and .

4. Understand your debt

Get clear on exactly what you owe and where. List all your debts, from your emergencies-only credit card to your car payment. Be sure to include details like which debts are the biggest and which are subject to the highest interest rates.

5. Prioritize repayments

From there, Conway advises taking one of two approaches to repayment:

• Debt snowball: Dedicate all extra income toward paying off your smallest debt. Once it’s repaid, apply the minimum payment from that debt, along with that extra income you scraped together, toward your next smallest debt. Work your way onward and upward from there. This approach not only works toward debt resolution, but it offers the intangible bonus of psychological satisfaction. “It allows you to get wins earlier by having small debts paid off,” Conway explains.
• Debt avalanche: First tackle repaying the debt that’s subject to the highest interest rate. Work your way down from there.

The fine print

Sometimes, it can make sense to explore a debt consolidation loan or transferring the balances on your credit cards to one with a low APR. But before you do:

• Consider the costs: Are there transfer fees or funding fees involved? These can make your overall interest rate and total cost higher.
• Watch out for scams: from legitimate nonprofit organizations can help borrowers effectively pay down their medical, credit card and other debt by liaising with creditors and arranging a repayment plan. But Conway warns that there are companies out there that charge exorbitant fees to do this, or sign you up for unnecessary services. Do your research.
• Understand your credit score may take a hit: If you do pursue a debt management plan or simply choose to close your credit card accounts, it might negatively impact your credit score. But if you keep up your payments and reduce or eliminate your debt, your score may gradually rebound with time.

4 ways to stay out of debt

If you can get out of debt, it’s important to understand how you can stay out of debt in the future. Here are four ways to keep your finances in check.

1. Focus on saving: Remember the cost-cutting referenced earlier? If you can live without whatever you cut, do. When you make it a priority (and have the means) to save even a little bit every month, you’re less likely to end up in debt.

2. Create an emergency fund: Once you’re out of debt, don’t spend that extra money. Put it in an account you don’t see or think about. Maybe even set up automatic deposits. Then, when you have a big car repair, medical bill or home expense, you have options on how to pay for it.

3. Make sure your insurance plan meets your needs: Medical debt can be sudden and overwhelming. But choosing an expensive insurance plan can be draining in a different way. Explore your insurance options and be realistic about your needs. If you have children and recurring medical costs (like doctor visits and medication), your needs will be different from a single, healthy twentysomething.

4. Avoid temptation: Keep your credit cards to a minimum and make it a policy to wait before you buy. “If it’s something you want,” Conway says, “consider a rule to wait X days or weeks before you buy it, especially if you’ll buy it using credit.”

After all, debt may be a dreaded four-letter word. But it may not be one you have to use.

This article is not intended to serve as financial advice. All financial decisions, including investments, should be made carefully and potentially with the guidance of a professional financial advisor.