*First National Community Bank’s blog does not constitute legal, tax, accounting, investment or other professional advice. Recipients should consult their professional advisors for advice.
With the economy in the news every day and interest rates on the rise, it is now more important than ever to effectively manage your debt. Whether you’re looking to borrow money to buy a new car or home or even open a new credit card, these tips for managing debt as interest rates rise can help minimize a hit to your wallet in the face of rising interest rates.
Tip #1: Make a Budget
Keeping an eye on your spending is an important first step. Creating a budget allows you to accurately track income and spending. Once you know where your money is going, you can work on ensuring that you are earning more than you are spending and make adjustments as necessary, such as making coffee at home instead of purchasing it on the way to work or packing a lunch, instead of going out to eat. Creating a budget will also allow you to make a financial plan and start saving for important purchases and an ever important emergency fund. To stay financially healthy and minimize the impact of rising interest rates, it’s key to earn more than you spend so that you have enough money to build savings for the future.
Tip #2: Know What You Owe
Another important step for managing debt as interest rates rise is to make a list of your current debt. This goes a step further than creating your monthly budget as this will provide you with the grand total of monies owed so you can begin to put a plan together for paying it off. The list should include credit cards, car loans, student loans and any other debt. While this may seem like a simple step, this can make a big difference in visualizing the big picture of your financial situation. An important part of seeing the impact of rising interest rates is understanding exactly where you stand and having a plan for reducing your financial burden.
Tip #3: Make A Realistic Payment Plan
It goes without saying that paying your credit card balances in full by the due date each month is the best option and helps you avoid interest charges on your purchases. By considering purchases before they are made and understanding the implications of the high interest rates often associated with credit cards before you spend, as well as knowing that you have the funds to pay the balance in full each month, you can help avoid having rising interest rates effect your household finances.
It is also effective to regularly review your interest rates, balances and terms on a monthly basis. Understanding this information allows you to adjust and make informed decisions about reducing your existing balances more aggressively. As a debt paydown strategy, it often makes sense to start with the highest interest credit cards or loans.
Managing debt as interest rates rise is a critical component to ensuring a sound financial future. As your locally owned community bank of choice, the success of your financial future is top of mind. We offer Personal Checking Accounts, Money Market, Personal Savings Accounts, CDs, IRAs, Business Loans, Treasury Management Services, Mortgages, Personal Loans of all shapes and sizes and much more! To learn more about First National Community Bank’s financial solutions, contact us here.
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