5 Ways to Manage Debt During Inflation

Over the past year, the cost of everything has gone up, leaving many of us doing a double take on the price of gas, groceries and other living expenses – and we can thank inflation for that.

It is not just the price of goods and services that is rising. There is also a correlation between inflation and debt.

Inflation can negatively affect your debt as it is often accompanied by a rising interest rates. With fluctuating rates, credit cards and other debt are likely to become more expensive as federal interest rates rise.

And if your wages remain unchanged during inflation and your Cost of life increases, it means having less money to pay off the debt. This could cause you to take longer to pay off what you owe or possibly default on your debt.

Higher interest rates It also means that the longer it takes to pay off the debt, the more interest your lenders will collect.

Inflation also generally leaves you with less purchasing power. Therefore, you can use credit cards more to cover your purchases in these difficult financial times. Thus, you are faced with paying more interest and you may also have to deal with higher debt overall.

Tackle debt while trying to fight against inflation is no small feat. Here are some ways to get started:

Before you take sudden action to pay off your debts or sink into despair, try talking to your lender. This can work in your favor if you’re a long-time customer with a good payment history.

Ask your lender to consider lowering your interest rate or changing your monthly due date to better match your payment cycle – negotiating small changes could help make a big difference over time.

Non-profit credit counseling agencies are always a great resource when you need help managing your debts, and they can be a lifesaver when dealing with your debts in times of inflation.

A non-profit credit counselor can help you create a budget and get a clearer picture of your finances to help you better navigate credit cards, student loans or housing costs. Plus, if you’re struggling with credit card debt, they can create a debt management plan to erase it.

The debt avalanche and debt snowball methods are two strategies that can help you reduce your debt. Paying off your debt using either of these processes can help focus your efforts.

The avalanche of debt The method focuses on settling debt with the highest interest rates while making minimum payments on your other debts. Then, once you’ve paid off a debt with a high interest rate, you direct the money you used for that account to the debt with the next highest interest rate.

If you opt for the debt snowball method, you can be more motivated because you can get quick wins by paying off the account with the lowest balance. Then, each time you got rid of the smallest debt, you continue to allocate that money to the account with the highest balance.

Look for ways to earn more money because even a little help can help you invest more to pay off your debts faster. For example, consider finding a part-time job or selling unused or gently used household items, jewelry, and clothing.

Reducing your expenses can help save more money to go into debt. That doesn’t mean you can’t spend on things that bring you joy, but you should be aware of where your money is going.

Consider some of the following ways to reduce your expenses: