How Carrying High Debt Costs You $500,000 for a Lifetime

American households are robbing their future by carrying high debt. How much consumer debt are we talking about? As of May 2024, the average household debt rose to $104,215. This includes mortgage balances, auto loans, student loans, personal loans, credit card debt, etc.

According to Experian, the US average total debt balance in 2023 was $103,358. This amount is up over 3 percent from 2022. Younger Americans carry nearly $7,500 of revolving credit card debt month-to-month at more than 27.99 percent APY. At this rate, it should be criminal. Making minimum payments would take more than 311 months ( nearly 26 years) and $12,580 in interest to repay.

That’s a lot of time. And a lot of missed opportunities. You have to do the math of the opportunity cost. If the same average $60 monthly payments were invested for the same period, you have nearly $55,450. That’s a profit of $37,150.

Even our Federal government is constantly raising the debt ceiling. The U.S. national debt is nearly $36 trillion as of early April 2024. Every year since 2001, the US government has spent more than it takes in. The national debt is discussed, but there isn’t enough political will to raise taxes and bring the debt to zero.

Unlike the Federal government, the worst part is that you miss out on building wealth as you tackle your household debt.

If the American Dream is Debt, Americans Killed It with Spending

Part of the problem is rampant consumerism.

Look around your home right now. I bet there are random items peppered around the house. Most of which you haven’t used in years. If you want to know where your wealth is going, check the garbage, the toilet, and the closet. It’s all going to waste.

The US self-storage industry is up to $44.3 billion. Although the self-storage industry cooled, nearly 10 percent of Americans rent a storage facility. On average, they pay almost $100 per month. Strikingly, American Household family size has grown smaller while living spaces have grown dramatically. American love stuff and Amazon made it easier via delivery. When the stuff overflows, people either pick up storage or lean into buying a bigger home.

The net effect of this uncontrolled consumerism is “Debt, Debt, and More Debt.”

Americans are also “doom scrolling” which leads to “doom spending.” Where do you think all these clothes (-hauls) are going? The damage is stacking up. Research into the effects of social media has shown that compulsive buying is significantly affected by intense platform usage. Social media plays a huge role in online marketing trends. TikTok, in particular, promotes excessive spending.

More Reasons to handle debt with a financial plan?

How much does it cost you in real-time?

Debt Type	Amount	Interest Rate	Total Interest Paid
Mortgage (30-yr term)	$244,498	6.93%	$336,964
Auto (5-yr term)	$23,792	6.73%	$4,293.11
Credit Card (min. repayment)	$6,501	24.62%	$12,862.85
Student Loans (10-yr repayment)	$38,787	6.87%	$14,943.66
Total	$313,578		$369,063.62

For an average household with a mortgage of $244,498, auto loan of $23,792, credit card debt of $6,501, and student loans of $38,787, you are looking at a total interest expense of nearly $370,000. Refer to the Table #1

For a household of two working adults, the total interest shoots past $500,000.

Considering that you will likely own more than two cars and other consumer debt regularly, it’s high time you consider an efficient repayment strategy.

Framing how to live beyond Financial Fears

Debt has been framed in fear for a long time but it doesn’t have to be that way. You can tackle it. It’s possible to pivot. Along with car loans, student loans, and other personal loans, the average American spends more than 9% of their monthly income on debt payments.

Translation, most households are aggressively spending to stay faux lifestyle positive while diving into their savings. The easiest solution is to come to a full stop.

After that, you need to write down your expenses. Most Americans avoid this step, and it’s the most important. You might be able to afford what you want by focusing on what you need to do first.

Instead of concentrating all that pent-up energy (rage) on spending, try channeling it into physical activity. With the excess dollars you have, pay down your credit card first. After that, invest in your employer’s retirement plan to lower your taxes. With the extra tax refund money, pour it into your car payments. Once you freed up those dollars, maximize your retirement accounts. Finally, once you reach financial security, you need to start paying off your student loans quickly. And in the end, around 50-55, throw extra dollars into your mortgage.

If there is a will, there is a way to use money differently.

While this might not lead you to yacht parties, I can assure you that you will feel less anxious about money than your peers. I know because I did all those things and continue to do those things. They work. Well, it’s that or more worries about an ever-increasing debt number. Also consider this, the more time and money you spend on debt, the less time you spend building wealth.

Inversely, those interest expenses (of $500,000) could’ve been interest gains (of $1M).

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