Bad debt is the most common mistake
The people Kamel interviewed had plenty of stories to share when it came to their personal financial misadventures.
One man said he regretted his “investment in solar panels” which was financed with no money down and involved a loan worth $36,000.
Another person said her biggest money mistake was buying a piece of art worth $1,000 with her credit card, while one couple admitted that they lived off their credit cards and had $40,000 in outstanding debt.
Meanwhile, many others said auto loans taken out on vehicles they couldn’t afford was their biggest money regret.
In fact, Kamel’s colleague, Dave Ramsey, considers cars to be the biggest indulgent purchase that keeps many Americans living paycheck to paycheck. “In the United States of America, cars are a status symbol,” he said during an episode of The Ramsey Show.
In the end, Kamel pointed out that those who responded to his callout were not necessarily “average Joes” — they are people who are considered financially savvy.
Nevertheless, their money missteps reflected the nation’s most stubborn problem: overconsumption financed by expensive consumer debt.
Households across the country have roughly $5.28 trillion in aggregate non-mortgage debt, according to the Federal Reserve’s Household Debt and Credit Report for the second quarter of 2024. Total household debt, including mortgages, is at a record high this quarter.
Non-mortgage debt, such as personal loans and credit cards, tend to have higher interest rates than mortgages.
For instance, the average 30-year fixed mortgage is 6.35% as of Sept. 3, 2024, while the median credit card interest rate as of August 2024 is closer to 24.74%, according to data from Investopedia and the Federal Reserve.
According to Bloomberg, this means the interest rate payments on non-mortgage debt is as high as mortgage debt for the first time on record in 2024.
Financial experts have some advice for those looking to avoid the squeeze of unsustainable debt.
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Read MoreEmbracing a low-debt lifestyle
Kamel’s colleague Dave Ramsey has often championed debt-free living. He said those willing to make sacrifices and delay instant gratification and avoid all forms of consumer debt are part of a “counterculture.”
As for mortgages, Ramsey recommends a 15-year fixed term (instead of the typical 30-year term) and keeping monthly interest payments below 25% of take-home pay.
For those with debt burdens that already exceed these limits, financial experts recommend the use of either the snowball method or avalanche method.
However, Ramsey prefers the snowball method because he believes it’s easier to stay motivated when you see gradual progress by paying off the smallest debts first. “Motivation is the secret sauce that gets you debt-free faster,” he wrote on his website.
Regardless of your strategy, taking steps to tackle debt as early as possible is likely to lead to better financial outcomes for your future.
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