Pretending Your Debt Doesn't Exist Won't Make it Go Away

Debt is a part of American life, plain and simple. Many of us are in debt and it can feel intimidating, sometimes even suffocating. Often, we choose to not think about our debt and just carry on living our day-to-day lives. 

Unfortunately, due to the concept of compounding interest, ignoring our debt only leads to more debt, as the total amount we owe continues to rise each month. 

So, why do we continue avoiding debt conversations with our partners? Why do we continue spending when it’s wiser to focus on paying off debt? Why do we pretend our debt doesn’t exist? 

The debt problem

Americans — and even the American Government — are in more debt than ever before. 

Total consumer debt in America hit a whopping $14.56 trillion at the end of 2020 — a number that can be hard to wrap your head around. 

And while much of that amount is mortgage debt (so-called “good debt”), a large chunk is made up of high-interest debt like credit card debt, student loans and personal loans. The average household credit card debt was $5,315 as of 2020. 

Credit card debt can be particularly problematic, due to the high interest rates charged. The average APR on credit cards ranges from 15.56% to 22.87% depending on credit score and other factors, and it can be even higher for some borrowers. 

Why we avoid thinking about debt: A lesson in psychology

The tendency to avoid thinking about or talking about debt can be linked to a psychological theory known as avoidance coping. 

Essentially, avoidance coping is when an individual changes his or her behavior in order to avoid thinking about or doing difficult things. In this case, it’s when an individual chooses not to think about their debt because doing so is difficult and causes anxiety. 

Like procrastination, avoidance coping is a method for dealing with stress — but it's an unhealthy method that isn’t helpful in the long run.

Avoidance coping is very common. If you’ve been ignoring your debt (or other problems in your life), you’re not alone. 

So, how do we change this kind of thinking for the better?

Confront your debt to improve your financial future

Unfortunately, your debt won’t be going away or getting better just because you ignore it. If anything, it will probably grow.

Thus, the first step to paying off debt is confronting the problem and accepting the situation. 

In practical terms, this means taking inventory. How much debt do you have? What type(s) of debt do you have? What are the interest rates, minimum payments and other loan terms? 

If you have an extensive amount of debt or want personal guidance, it can be helpful to work with a financial management company or personal financial advisor to take stock of your financial situation. 

How to make a financial plan to pay off debt

Once you’ve confronted your debt, it’s time to make an actionable plan to pay it off, while hopefully avoiding debt in the future.

Here are some tips that can help you: 

Prioritize high-interest debt: The first type of debt to tackle is high-interest debt such as credit cards. Debts with high interest rates will grow faster than debts with comparably lower interest rates, so it’s wise to tackle these high-cost debts first. 

Tally† can potentially help you consolidate and pay down credit card debt. Tally is a personal finance app that offers a lower-interest line of credit helping you save money while you pay off debt.

Pay more than the minimum payment: Whenever possible, it’s smart to pay more than the minimum payment on your loan and debt payments. Often, paying just the minimum will barely make a dent in the debt. If you pay a little more each month, you can start making real progress toward paying off the debt for good. 

Avoid new debt: It can be tempting to put new expenses on a credit card while you pay off old debts, but this only leads to more problems down the road. Whenever possible, use cash or a debit card for necessary expenses so you can avoid taking on more debt. 

Consider the “snowball method”: Traditional financial advice says to prioritize paying off your most expensive debt first. However, some people prefer the debt snowball method, which involves paying off your smallest balances first to create a psychological win and a morale boost. Each method has pros and cons, but some people find a lot of motivation in the debt snowball approach. 

Consolidate and/or refinance debt: Many borrowers are able to save money on interest by consolidating and/or refinancing their debt. Tally† helps people consolidate credit card debt and cut back on credit card interest. 

Know you’re not alone: Finally, it’s helpful to remember you’re not alone on your journey to paying off debt. Many people have debt they’re working to pay off, and if you’re taking actionable steps now, you’re well on your way to a brighter financial future by avoiding debt! 

For further reading on personal finance, check out the Tally Blog about debt payoff. †To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. Based on your credit history, the APR (which is the same as your interest rate) will be between 7.90% - 29.99% per year. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.