By GreenPath Financial Wellness
Debt can be a challenge to manage, even in the best of times. Now, with the economy in the news and the cost of borrowing for things like homes, cars and credit cards on the rise, many may be wondering how to effectively manage their debt.
Here are five general questions to ask yourself to minimize the impact of rising interest rates on your wallet.
What is your current credit score and history? Knowing this information can help you understand how rising interest rates will affect you. Research shows only 8.6% of Americans check their credit scores regularly.1 Monitoring your credit can alert you to errors, protect you from fraud and provide valuable information to strengthen your credit score – which can potentially minimize the rising cost of borrowing.
What’s your debt portfolio? Another helpful course of action is to make a list of your current debt such as credit cards, car loans, student loans, etc. Although it’s a simple step, this can make a difference in visualizing the big picture of your financial situation. Part of seeing the impact of rising interest rates is understanding exactly where you stand.
What are your current interest rates? An effective next step is to review your balances, terms and interest rates on a monthly basis. By staying on top of this vital information, you can make adjustments and informed decisions about reducing any existing balances more aggressively. As a debt paydown strategy, it often makes sense to start with the highest-interest credit cards or loans.
What is a realistic payment plan? As you are able, consider paying credit card balances in full by the due date each month. You can avoid interest charges on what you purchase, which means rising interest rates may not have much of an effect on your household finances.
What is your overall financial plan? To stay financially healthy and minimize the impact of rising interest rates, it is key to earn more than you spend, so that you have enough money to build savings for the future. Keeping an eye on your spending is an important step in the effort to create a budget to avoid the cost of high-interest debt. Once you develop a household budget and track income and spending, it becomes clear where the money is going and where you need to adjust your spending to achieve your financial goals. By setting financial goals, preparing a financial plan, sticking to a budget and setting up an emergency fund for the unexpected, you can ensure your financial well-being will not suffer as interest rates continue to rise.
A Trusted Resource
There may be times when you need additional help to manage everything going on financially – especially as the cost of borrowing becomes more expensive. Our partners at GreenPath Financial Wellness provide guidance to help you understand your credit history, as well as debt management advice.
Contact a GreenPath counselor to address your financial concerns and develop a plan to pay off debt, build savings and create a financially solid future.
This article is shared by our partners at GreenPath Financial Wellness, a trusted national non-profit.