How Your Living Situation Can Affect Your Debt Levels

These days, it’s more accurate to think of debt as the rule, not the exception. Most people have it in some form or another: mortgages, auto loans, credit card balances, student loans, medical bills, personal loans, etc. As Americans, we’ve collectively surpassed $1.3 trillion in total consumer debt—which means the average household carries nearly $140,000 in debt.

People from all walks of life deal with debt. There’s not necessarily a “typical” U.S. consumer struggling with debt because it can happen to anyone, regardless of where you live or how much you earn. However, there are some immutable facts to consider that affect someone’s likelihood of needing to take on debt to survive. One of these factors is your living situation.

Here’s more on how your living situation can affect your debt levels.

Hand in Hand: Debt and a Higher Cost of Living

Curious about the connection between cost of living and debt levels? One recent study looked at holiday season debt levels in New York City, a location with a notoriously pricey cost of living. Whereas the average American renter finds themselves about $400 in debt following the three-month holiday period, renters in New York City ended up with 10 times that amount – $4,200 by New Year’s Day, according to New York Post.

This study demonstrates how higher housing costs and higher living costs for essentials like food and transportation can contribute to the accrual of debt. To stay afloat, people living in more expensive areas spend more on everything, from rent to seasonal activities.

The general rule of thumb when it comes to housing is that it’s advisable to spend less than one-third of your income on rent or mortgage. However, a quarter of renters spend more than half their income on housing, and half of renters pay more than 30 percent of their incomes.

When people are forced to spend more on housing, they have less to spend in other areas—which can lead them to take on debt to stay afloat, especially if they use credit cards with high interest rates to pay for other essentials and nonessentials as they go. Paying a large percentage of your income toward housing also makes it difficult to pay for emergencies as they arise, like unexpected medical mishaps or car troubles.

Strategies for Minimizing and Eliminating Debt

Are you having a tough time balancing housing costs with other financial demands from life, resulting in debt? You’re certainly not alone here. The problem with debt is that, thanks to interest, it keeps building, even if you’re making minimum payments all the while.

Exploring various debt relief options can help you figure out how to end this cycle and regain control of your finances.

Consumers with multiple high-interest debts may benefit from debt consolidation, or taking out one personal loan to cover multiple other balances. The idea here is that it’s easier to pay back a single loan with a lower interest rate than it is to juggle a handful of balances, each with a higher interest rate and its own due date.

If you’re saddled with serious debt exceeding $10,000 and struggling to make even minimum payments, debt settlement programs like Freedom Debt Relief may help consumers resolve debts for less. This strategy involves depositing money each month into a dedicated account until you’ve amassed enough for negotiators to start attempting to reach a resolution with creditors. In the best-case scenario, you’ll be able to pay off debts for less than their original balances. Certain enrollees may even qualify for Consolidation Plus, which uses a consolidation loan to speed up this settlement process.

Some people try to tackle debt on their own terms, streamlining their spending habits and applying the savings toward what they owe.

One key takeaway from this connection between high living costs and debt is the absolute importance of having an emergency fund to pad yourself against unexpected expenses like job loss.

Long story short: Your living situation can undoubtedly affect your debt levels but there are always strategies you can try to reduce your debt and strengthen your financial situation.