Financial expert Anthony Joseph Amaradio emphasizes that developing an appropriate repayment strategy can help borrowers better manage their obligations, reduce financial pressure, and work toward eliminating outstanding liabilities.
-- The Federal Reserve Bank of New York’s third-quarter 2018 report on U.S. household debt and credit highlighted continued growth in consumer borrowing, with total household debt increasing by $219 billion to reach $13.51 trillion. The increase represented the 17th consecutive quarter of growth and placed overall household debt 21.2% above the post-financial-crisis low recorded in mid-2013.
While rising household debt can raise concerns about financial vulnerability, increased borrowing can also reflect consumer confidence and a willingness to make long-term financial commitments. A Moody’s Investors Service analysis cited by MarketWatch noted that consumers’ ability to manage debt had improved since the 2008 financial crisis, supported in part by low interest rates and sustained economic growth.
Nevertheless, many households continue to manage multiple forms of debt, including mortgages, credit cards, student loans, auto financing, and personal loans. Financial expert Anthony Joseph Amaradio emphasizes that developing an appropriate repayment strategy can help borrowers better manage their obligations, reduce financial pressure, and work toward eliminating outstanding liabilities.
There are several well-tested methods for dealing with financial obligations, and while most borrowers are probably aware of them, they find it difficult to select the one that best aligns with their goals. The so-called snowball and avalanche strategies are perhaps the best-known options: the first factoring in the amount to be repaid and the second focusing on interest rates, with payments prioritized on the basis of these parameters. With the snowball approach, borrowers start by eliminating the lowest balance and proceed upward, while the avalanche method involves the repayment of debt with the highest interest rate first and moving down the ladder. With credit card loans, in particular, a combination of the two can be implemented; this hybrid approach has certain benefits from a psychological point of view: as a study by the Harvard Business Review and HelloWallet found, morale is a critical motivator in debt repayment. Households dealing with multiple loans can benefit from a debt consolidation strategy, which not only simplifies matters but can reduce the interest rate for those with a good credit score.
While borrowers have a number of options, it can prove difficult to select the right one, especially since people are motivated by different things, Anthony Joseph Amaradio points out. The snowball strategy would be suitable for those who are psychologically rewarded by immediate progress, while the avalanche method is for people concerned about costs or dealing with a large amount of high-interest debt. The hybrid approach offers the desired “quick win” but can also lead to substantial savings, whereas debt consolidation may not be possible for people with an impaired credit history. Since multiple factors come into play, the best course of action is to seek the advice of an expert debt consultant, who can evaluate all aspects of a given financial situation and recommend the optimal strategy.
Financial expert and dedicated philanthropist Anthony Joseph Amaradio is the founder and chief strategist of Select Portfolio Management Inc. and Select Money Management Inc., where he employs an innovative integrated strategy to maximize results for clients. Earning his BBA from the University of Michigan and an MBA from the University of Detroit, Amaradio commenced his career in the financial services industry. Passionate supporters of charitable causes, he and his wife, Carin, are often invited to speak at events hosted by non-profit organizations, many of which rely on his expertise to optimize their capacities and thus improve their effectiveness.
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