Money Read Time: 3 min

How to manage debt

Debt is a fact of life for most Americans. Borrowing money is typically the only way many of us can pay for big-ticket items like cars, homes and college education. The challenge lies in how to help manage debt wisely to avoid overextending yourself.

Here are 8 common ways to help you stay in control of your debt and live more confidently.

Know what you owe

One-third of adults avoid dealing with their finances because it’s too overwhelming, according to a recent study. Avoidance only makes debt-stress worse: You can’t manage what you don’t know. Make a comprehensive list of all your debts — from car loans to credit card balances — so you have a true picture of your financial situation.

Figure out your limits

How much debt can you comfortably manage? That’s known as your debt-to-income ratio. Many financial professionals recommend a household should spend no more than 15% of its gross monthly income on debt — that’s principal plus interest payments. Let’s say your household has a monthly pre-tax income of $10,000. Ideally, you should be spending no more than $1500 on total monthly debt. If your debt load exceeds these guidelines, you need to rethink things.

Commit to a budget

A budget is a practical money management plan. It’s essential to help managing debt because it helps you avoid spur-of-the-moment purchases. With a budget you allocate your monthly income into different categories: needs (like rent, utilities, credit card and loan payments), wants (like entertainment, dining out) and goals (like a new car, trip). Here’s a primer on helping to create a simple budget that is easy to follow.

Take big swings at credit card debt

One debt reduction strategy is to concentrate first on paying off debt that costs you the most in interest. For most households, that’s credit cards. Nearly half of Americans with credit cards carry outstanding debt on those cards, with an average balance of $5,270.1  Carrying a large balance forward is like pushing the same boulder up the mountain, month after month. Try to pay off your balances each month and, at the very least, pay more than the minimum.

Think before you buy

A lot of us apply for new credit cards without thinking. And when we see an expensive item, the first thought is “well, I can put it on my card” rather than “I could save for that.” To break the credit card habit, pay in cash as much as possible. Carry just one card and use it only for necessities. Start a savings fund for pricey things, like vacations and furnishings.

Pay yourself first

It’s important to have protection measures in place to avoid further debt. In essence, you pay yourself first each month by allocating money towards savings and insurance coverage. Why? Let’s say you have an accident or unexpected illness that leaves you unable to work. Without the cushion of an emergency fund and disability insurance to give you the ability to earn an income, you could easily slip back into debt again.

Retire debt before you retire

As you age, your income typically decreases, and major debt can become a problem. Try to pay off your mortgage before you retire. If you have credit cards with high interest rates, use them less frequently and pay them off promptly. The less you owe, the more confidence you can have that your retirement income will see you through.

Ask for help

If you’re struggling with debt, you may be able to negotiate with your creditors to reduce the amount you owe or develop a more viable repayment plan. Also, consider talking with a financial professional who can walk you through the steps to help manage your debt and become financially and emotionally confident.


1 The Washington Post, More debt, higher fees: Credit card borrowers face mounting burdens, 2022.


Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. Neither Guardian nor its subsidiaries issue Health Insurance.

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2022-148147 Exp. 12/24 *Pre-approved content*

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