As we head into the holiday shopping season, now is a good time to review your debt situation. Recent data shows that 77% of American households have debt of some sort—especially as the effect of inflation has taken hold. When you couple that with the fact that three in five people report living paycheck-to-paycheck, it’s easy to see the challenge facing American families this year.
That said, the good news is that there are ways to lessen future financial fallout, even if you are living paycheck-to-paycheck.
Here are four to start:
- Assess your debt List all of your debts, including outstanding balance, interest rate, and minimum payment. This is the first and most important step in setting up a plan.
- Always pay on time. Consider enrolling in auto-pay when possible. Remember, payment history makes up 35% of your credit score, so it is critical for your future financial health to make payments on time.
- Add to your emergency fund. Building an emergency fund of 3-6 months of living expenses feels daunting—especially in this inflationary environment. But keep at it as you’re able! Every dollar you can set aside now will help you build a safety net to stay out of debt when unexpected expenses come your way.
- Use windfalls to reduce debt balances. Start planning now to use unexpected money such as tax refunds or bonuses at work to pay down debt balances.
If you have questions and would like to ensure you’re making the best decisions for you and your family given the current climate, feel free to reach out at 716-445-7465 or email [email protected].