Though digging out of debt can seem like an insurmountable challenge, a new survey suggests that not only is it possible, but a large percentage of consumers are successfully getting out of debt and changing their financial habits for the better.
Financial services company New York Life surveyed 2,201 adults to find out how debt affects their lives and how they are handling it. The survey found that more than half of respondents have either paid off all of their debt or more than half of it.
Of the survey sample, more than a third (35%) said they’ve never had more than $5,000 in debt. The youngest respondents, those who represented Generation Z and are defined by Pew Research as being ages 22 and under, were particularly likely to have smaller amounts of debt, with 70% saying they’ve never owed more than $5,000 in debt. Among millennials, those between the ages of 23 and 38, 62% said they’ve never had more than $10,000 in debt. Among baby boomers, those between the ages of 55 and 73, 77% had more than $5,000 in debt. The survey also identified some respondents who had $75,000 or more in debt at one point in their lives.
Regardless of how much debt respondents found themselves in, a majority reported some level of progress in paying it down. More than a third (35%) said they had paid off all of their debt, and 27% said they had paid off more than half of the debt they had incurred.
Even those who reported having had the highest levels of debt — $75,000 or more — showed that they have made tremendous progress, with 55% saying they have either paid off all or more than half of their debt burden.
Lessons learned from paying down debt
While digging out of debt can feel like a negative experience, it can have some positive ramifications. In fact, the survey suggests that the experience of debt may have led some consumers to recognize the importance of saving and improving their overall financial habits.
When asked what financial habit was most important to them when their debt was at its highest level, 37% of respondents said following a budget. Likewise, 46% said they would contribute to a long-term savings or emergency fund if they had no debt.
Also, respondents who completely paid off $75,000 or more in debt were more likely than the general survey population to say they follow a budget and contribute to a retirement fund.
Once respondents were free from debt, many set their sights on growing their money or making purchases they likely couldn’t swing before:
- Respondents were 14% more likely to put money in a long-term savings account or emergency fund than when they had the highest amount of debt.
- Respondents were 15% more likely to save for a long-term purchase than at the peak of their debt.
- Respondents were 11% more likely to invest in the stock market than when their debt was at its highest level.
One of the best things you can do to improve the quality of your life is to get out of debt, as doing so frees up money you’ve been paying on interest and allows you to use your money to achieve other financial goals. Credit card debt can be particularly burdensome, as it often comes with higher interest rates than other types of debt such as personal loans. Coming up with a plan to get out of debt is key, and you may benefit from picking a debt payoff strategy and sticking to it.