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Setting financial goals the 5-10-15-20 way. Goal #4 Debt

Thomas  Charla

Posted on January 04, 2022

Thomas Charla is an expert in financial planning and wellness as well as business markets for MassMutual.
Young couple sitting at kitchen table, the woman is holding a newspaper smiling looking at the man who is on a laptop

Many Americans today are struggling to keep up with their debts. Credit cards, student loans, and personal loans are all contributing to what many feel is an overwhelming situation: living paycheck to paycheck with no relief in sight.

Indeed, total personal debt in the U.S. stood at an all-time high of $14.96 trillion in 2021.

Setting a debt elimination goal: 20 years?

And debt can quickly spiral out of control, affecting your financial goals and putting all your plans in jeopardy. The key is to find the proper balance between debt, income, savings, and retirement as part of an overall financial strategy. 

Often, you can start to find that balance by viewing the elimination of your debt as a long-term financial goal — one that is planned for, reviewed, and assessed regularly. (Related: Budget essentials)

Consider creating a debt management plan with a completion date of no more than 20 years (excluding a long-term mortgage). If you can eliminate your debt sooner, even better.1

Good debt vs. bad debt

Start developing your debt payment plan around “good debt” and “bad debt.” Good debt is that which can provide value over the long term, such as a student loan. Another way to define “good debt” is if it helps to generate income or increases in worth.

Bad debt, on the other hand, is debt incurred for things that will lose value over time – or not increase in value – like consumable goods charged to your credit cards. The “bad” in this type of debt is often compounded through higher interest rates and the inability to pay the credit card balance in full each month. (Related: Good debt versus bad debt)

Identify how much of your debt is good, and how much is bad. Then focus first on paying off the ‘bad’ debt – which is often associated with higher interest rates (and therefore more expensive).

Other ways to manage debt are:

  • Target one debt at a time, tackle it, and move on to the next.
  • Pay more than the minimum balance due whenever you can.
  • Take advantage of balance transfers onto lower rate credit cards.
  • Halt new credit card spending.

Light at the end of the tunnel

While 20 years may seem like a long time, that’s roughly how long, on average, it takes a college graduate to pay off his or her loans, according to research by educational services company Cengage.2

The goal is to have a clear path toward debt elimination, one that gives you the opportunity to balance your obligations and your goals. Start developing your debt pay-down plan with a 20-year horizon, then shorten the time frame as appropriate and as you are capable.

Bottom line: You want to have a light at the end of the debt tunnel —one that helps you become free of debt by the time you retire.

More from MassMutual on setting 5-10-15-20 financial goals:

Goal #1: Income

Goal #2: Savings

Goal #3: Retirement

This article was originally published in December 2016. It has been updated.


1 MassMutual and its subsidiaries, its employees and representatives do not offer services or advice related to debt management.

2 Cengage, “2019 Cengage Student Opportunity Index,’ May 2019.

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The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.