The joy of screaming at your friends over the roar of a crowded bar, the fear of heights, watching the world rush past from the seat of an airplane, the strangely constricting feeling of wearing inelastic pants – the summer of 2021 brought back many experiences that we in forgot about the past year and a half of the pandemic.
But this urge to recreate a world that felt “normal” may have brought back another familiar feeling: the fear of accumulating debt.
When it is your summer of “revenge” spending on your own amortization in the form of residual debt, make a repayment plan. Then, think about how you can keep yourself from going into even more debt as you progress and setbacks along the path to normal.
Take stock of your debt – and find your payout path
Whether you spend most of your time at home or killing time at the airport terminal before a flight, there is time to clean up your debt and choose a payout strategy.
First, understand exactly how much you owe to whom. If you don’t know all the details, certified financial planner Pamela Rodriguez in Sacramento, California suggests Pull out your credit reportsyou can do for free.
“Getting your credit report is probably the quickest way to find out what you owe because there is no hiding from your credit report,” says Rodriguez.
List your debts using a spreadsheet, pencil and paper, or debt settlement app. Enter the balance, the interest rate and the minimum monthly payment. Make sure you consider all forms of debt, such as: B. Buy now and pay for loans later.
Then, look at your income and expenses to see how much money you are putting on debt and where you can cut expenses. For example, if you’re spending more on restaurants than you did six months ago, try reducing that to free up cash to pay off debt.
Next, choose a strategy for the payout. Here are a few common tactics:
Debt snowball: With that Debt snowballfocus your debt settlement energy on the smallest balance first, while making minimal payments for the rest. Once the smallest debt is dismissed, roll the amount you paid for it to the next smallest debt. As you pay off more debt, the payment amount grows like a snowball until you are out of debt.
Debt Avalanche: With this method, you pay off the debts with the highest interest rate first. Then, similar to the debt snowball method, once it’s paid off, cascade the payment with the next highest interest rate on your debt.
Wire Transfer Credit Card: If your credit is good enough to qualify for one, a 0% APR promotional credit card can help settle debts faster and cheaper than keeping them on the original credit card. Make sure to clear the balance before the 0% promotional period ends to avoid interest payments.
Whichever payout path you choose, it’s important to choose one and commit yourself. Switching back and forth between a few different options can cost you time and money as the debt continues to accrue interest.
“People have decision-making overload when it comes to paying off their debts,” says Thomas Nitzsche, finance educator at the non-profit credit advisory agency Money Management International. “Just come to terms with the fact that you have to do something and find a way to overcome this emotional barrier.”
Know your spending habits and triggers
If your summer debt was the result of spending revenge, find the triggers that led you to overpaying so you can avoid falling back into debt in the future.
For many, this may have been an opportunity to experience something that was withheld from them in the first year of the pandemic.
While traveling and dining out are safer for vaccinated people, these activities can wear out Your Büdget. Rodriguez suggests finding more affordable ways to enjoy the activities you want.
“If you can think of one thing that was withheld from you, find a smaller scale of it,” says Rodriguez. “So a smaller amount of travel would be a local adventure, and that is so much more manageable financially.”
The way forward in the pandemic seems likely to have a series of starts and stops, with accompanying opportunities to either spend or save money. Seize the moments when you can cut back on your expenses and spend more money on your debts. Manageable debt – or no debt at all – gives you more options when the world is ready to fully open up.
This article was written by NerdWallet and originally published by The Associated Press.