Jan 1, 2026
Individual debt levels are climbing in the U.S. Just under half (46%) of the population owes money on their credit cards, 42.7 million have student loans and a further 61.2% of Americans have mortgages, with average balances across all three standing in the region of $300,000 (1).
With so much debt hanging over us, it can seem like an impossible task to pay down all the money we owe and save enough for retirement. This is the issue that’s facing Jerome and Alex.
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The couple still owes $250,000 on their $400,000 home, resulting in mortgage payments of $2,000 per month, and has more than $100,000 in additional debts, which consist of a mix of student loans, credit cards, car loans and medical debt from the birth of their son.
The couple brings home $70,000 each year after taxes, but is having a lot of trouble making ends meet between their debt payments and the costs of raising a young son. They feel behind on saving for the future, and worry about their ability to meet any financial emergencies that may arise.
Against this stressful backdrop, Jerome wonders if it might be worth selling their home. He reasons that they could find a cheaper apartment and use the extra money to pay down debt, save for retirement and fund their son’s future college expenses.
Their financial situation
Jerome and Alex live in Indiana, where the cost of living is lower than the national average. Jerome has a steady job in the pharmaceuticals industry, while Alex is a massage therapist who currently works part-time to balance taking care of their son and household.
The couple’s credit card debt is $20,000, and they owe a combined $40,000 in student loans. They also owe $50,000 on their two cars, and are paying off $25,000 in medical debt from Alex’s hospital stay while she delivered their son.
The APR on their credit cards is 28%, which is higher than the national average of 25% (2), and the couple directs what extra cash they can find at the end of the month to pay down this debt first.
However, Jerome feels that if they could sell their house and move into an apartment for $1,500 per month, they might be able to get ahead financially.
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Selling their home
Giving up their chief asset is a radical move for Jerome and Alex, but does it make financial sense?
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In Indiana, selling costs are low for homes, averaging just 0.9% of the property’s sale value. However, that excludes real estate agent commissions, which can range between 2.5% and 3% of the sale price (3).
In other words, if the couple sells for $400,000, they can expect to receive, after factoring in their outstanding mortgage, $146,400 or roughly $135,400 if they use a real estate agent. Considering they have debts totaling $135,000, that means selling with either $11,400 or potentially nothing left to catch up on their savings and fund other needs.
If we assume they come out of the deal with $11,400 and invest it, together with an extra $500 each month from the money saved moving to a lower-cost apartment, it would take them just under 20 years to save $400,000 — and that’s with a generous annual average return of 10%.
In the same time frame, their house would likely appreciate in value, be mortgage-free and potentially give them a better overall return on their investment.
How to balance their budget
While selling is probably not a great option for this couple, they do have to put some serious plans in place to pay down their debt and reduce their dependence on credit cards to make ends meet.
Some things they can consider doing to cut down their expenses include:
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- Looking into student loan debt consolidation to bring down their interest rate and pay off their debt faster.
- Opting for a balance transfer on their credit cards to take advantage of an introductory 0% APR (provided they can pay off the balance in time).
- Speaking to their credit card companies about a repayment plan to make their debt more manageable.
- Selling one of their cars to cut down on this major portion of their debt, or even selling both cars and opting for a cheaper model.
- Jerome could consider taking on a part-time job or other side hustle to bring in extra income.
- Cutting down their expenses as much as they can by looking for secondhand baby items online or at neighborhood marketplaces, quitting or reducing their subscription and streaming services and looking to trim entertainment and food budgets by eating at home as much as possible.
Read More: Dave Ramsey says this 7-step plan ‘works every single time’ to kill debt, get rich in America — and that ‘anyone’ can do it
Taking 'baby steps'
Jerome and Alex might consider a plan like Dave Ramsey’s 7 Baby Steps (4) to pay down their debt and begin to save in earnest.
The first step is to build a $1,000 fund for emergencies and to prevent the couple from using more debt.
Next, they can pay off their debt, potentially starting with their highest-interest payments first, and then increase their emergency fund to three to six months’ worth of expenses.
From there, they can look to pay extra on their mortgage and use the funds they had earmarked for the debt to build a bright future, including saving as much as possible for their retirement and their child’s future.
Of course, achieving all this requires plenty of discipline. To get through the steps, Jerome and Alex will need to make sacrifices.
Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Federal Reserve Board Publication (1); Investopedia (2); Bankrate (3); Ramsey Solutions (4).
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Rebecca Holland is dedicated to creating clear, accessible advice for readers navigating the complexities of money management, investing and financial planning. Her work has been featured in respected publications including the Financial Post, The Globe & Mail, and the Edmonton Journal.
