Having a financial priority in life is part of managing your finances and believe it or not, the debt payments you make is a good representation of that. You may not realize it but your existing debt payments can give you a sneak peek of what you unconsciously pay more attention to when it comes to your finances.
If you have a lot of payments because you keep on gambling your money away, it is quite obvious that you put a lot of your time and effort into it. This is where it starts to become a problem for you especially when it begins to affect your budget and finances. You will start to notice that your goals and financial targets seem to be constantly getting further and further away.
Your financial priority will also come to light if your debt payments are riddled with card payments for airline tickets and hotel bookings. It goes to show that you love to travel and maybe explore different places. There is nothing wrong with this as long as you can afford the travel. What this goes to show you is that what you pay for the most can reflect on what your priority is.
What are Americans paying for the most in their household budget?
Now that you have an idea of how your debt payments correlate to your priorities in life, it is interesting to look at what most Americans are paying for the most. This helps you understand where you stack up with everyone else.
Mortgage loans remain to be one of the top debt payments for most Americans in the country. In fact, the New York Fed shares that mortgage balance in the 2nd quarter of 2019 went up by $162 billion reaching $9.4 trillion. This goes to show that a lot of Americans still consider owning a house one of their top goals in life.
This is the reason why a lot of people take out mortgage loans. Not everyone can buy a house in cash because most of them cost six-figures at the least. The top 1% in society might be able to afford to buy several homes but that is not for everyone. For most people, you can afford to save enough for a downpayment and the rest has to be borrowed from a lender.
One good thing about a mortgage debt is that it is a secured loan. Your lender has a lien on the property in case you stop paying your loan. However, you get to have a lower interest rate since your lender has a fallback if things go south. With lower rates, a lot of Americans are choosing to take out a mortgage loan to finally buy their dream home.
There are some people whose financial priority revolves around education which is the reason why they have huge student loan payments. In fact, Forbes shares that in 2020, student loan debt in the country has reached $1.56 trillion. This has already long surpassed credit card and car loan amounts in the country.
Student debt is classified as an unsecured debt that is why it would have a higher interest rate compared with your mortgage loan. What you will hear people say is that lenders will have a hold on your future salary. You haven’t received your first paycheck yet but your lenders are already entitled to a part of what you will earn in the future.
It might seem like a scary thought but what you have to remember is that graduating college or even pursuing post-graduate studies opens a lot of doors for you professionally. It is true that taking technical courses can help you get a job, a college degree still gives people an advantage when looking for a job after college.
Credit card debt
There is a good chance that you have a credit card under your name and that you are carrying a balance on it. USA Today explains that on average, consumers carry a balance of about $6,200 on their credit card. This is a little more challenging because consumers use credit cards for a variety of reasons. One thing it points out though is that when you have a huge card debt, you may not be managing your income well.
This could mean that your financial priority is geared towards spending more than what you can pay for every month. You prefer to use your card and charge items rather than saving up for it. Though there are people who can use their card to their advantage, unmanageable debt could mean you prioritized spending more than saving money.
Get your financial priority in order
Now that you have an idea of how your current debt payments give you a glimpse of what you prioritize in terms of your finances, the next step is to change gears. You need to make sure that you are putting your focus on areas you want to achieve in life. Here are a few things you can start looking into.
Make a list of your goals in life
It is important that you have a clear idea of what your goals are in life. Without this, you will be chasing multiple targets all at the same time. You will be spreading yourself out too thinly that you will barely achieve any progress. The end result can be starting on different projects and targets in life but never really achieving anything.
If you have a list of goals you want to reach, you can carefully guide your actions and make sure that get to focus on your financial priority. It can serve as your definitive guide so you do not waste your time doing other unimportant things.
Identify the steps to take to reach your goals
Once you have identified your goals, you can start putting together the steps you need to take to make it happen. If you want to save for a downpayment on that house you want to buy, the get the specifics. Find out how much the house is and what percentage you want to put down. With that amount in mind, start spreading it out over a few months so you have the money when you need it.
If your priority is to simply get out of your credit card debt, you can take a similar approach. You can also work with a debt consolidation company to help you manage your payments better. You could also be dreaming of putting up your own business. If this is the case, identify the steps you need to take to make it happen.
Make the necessary adjustments
Once you have identified the specific path you need to take to reach your goals, there might come a time where you have to make financial adjustments to make it work. If you are saving for a downpayment on a house, you might have to move things around to help you save. This can mean looking for a side gig to help you save more money. It could also be looking for ways to help you save money at home like cooking meals or eve taking the bike to work on some days.
There is no doubt that your debt payments will surely reflect what your financial priority is in life but it does not mean that you cannot change it. You can still correct your path as long as you identify your goals and put in the work to get there.