Overcome summer ‘revenge shopping’ debt | personal financing
“Pulling your credit report is probably the quickest way to find out what you owe because there is no cache of your credit report,” Rodriguez says.
Using a spreadsheet, pencil and paper, or debt repayment app, list your debts. Include the balance, interest rate, and minimum monthly payment for each. Be sure to account for all forms of debt, such as buy now, and pay later loans.
Next, research your income and expenses to see how much money you can put into debt and where you can cut back on spending. If you’re spending more on dining out than you did six months ago, for example, try cutting back to free up money to pay off debt.
Next, choose a strategy to drive it. Here are some common tactics:
Debt snowball: with debt snowball, you direct your debt-paying energy toward the smallest balance first with minimal payments on the rest. Once you get rid of the smallest debt, roll over the amount you were paying on the next smallest debt. As you wipe out more debt, the payment amount continues to grow like a snowball until you are debt-free.
Debt Avalanche: With this method, you can pay off the debt with the highest interest rate first. Then, similar to the debt snowball method, once you pay it off, you cascade down the payment on your debt with the next highest interest rate.