Millennial Money: Beat Your Summer “Revenge Buy” Debt

Ransomware attack before holiday leaves companies scrambling

TAKE STOCK OF YOUR DEBT — AND FIND YOUR PAYOFF PATH Whether you’re back to spending most of your time at home or killing time at an airport terminal before a flight, find time to sort out your debt and pick a payoff strategy.

But this push to re-create a world that felt something like “normal” may have brought back another familiar feeling: the anxiety of racking up debt. If your summer of “revenge” spending has come for a payback of its own in the form of lingering debt, make a plan for paying it off. Then, think about how to prevent yourself from getting into more debt as you navigate progress and setbacks on the path to normalcy. First, understand exactly how much you owe and to whom. If you don’t know all the details, certified financial planner Pamela Rodriguez in Sacramento, California, suggests pulling your credit reports, which you can do for free.

“Pulling your credit report is probably the fastest way to know what you owe because there’s no hiding from your credit report,” Rodriguez says. Using a spreadsheet, pencil and paper, or a debt payoff app, list your debts. Include the balance, interest rate and monthly minimum payment for each. Be sure to account for all forms of debt, like buy now, pay later loans.

Then, dig into your income and expenses to see how much money you can put toward debt and where you can cut spending. If you’re spending more on dining out than you were six months ago, for example, try cutting back on that to free up cash for debt payoff. Next, pick a strategy for paying it off. Here are a few common tactics: — DEBT SNOWBALL: With the debt snowball, you channel your debt payoff energy toward the smallest balance first while making minimum payments on the rest. Once the smallest debt is knocked out, roll the amount you were paying on it to the next smallest debt. As you wipe out more debts, the payment amount keeps growing like a snowball until you’re debt-free.

— DEBT AVALANCHE: With this method, you pay off the debt with the highest interest rate first. Then, similar to the debt snowball method, once that is paid off, you cascade the payment onto your debt with the next highest interest rate. — BALANCE TRANSFER CREDIT CARD: If your credit score is high enough to qualify for one, a credit card with a 0% APR promotional period can help you pay off debt faster and cheaper than keeping it on the original credit card. Be sure to wipe out the balance before the 0% promotional period ends to avoid paying interest. No matter which payoff path you choose, it’s important to decide on one and commit. Waffling between a few different options can cost you time and money as debts continue to accrue interest.

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