3. Be strategic with your credit card debt.
Don’t rely too heavily on credit cards during periods of high inflation. The average American has more than four loans (opens in new tab)cards, and the United States just hit an all-time high of $930 billion (opens in new tab) in credit card debt.
Depending on your credit score and how responsibly you use your cards, I recommend having no more than three to five credit cards. More than that can be hard to keep track of and makes it easier for you to dig yourself a hole. If you only make the minimum payment, it could take months or years to pay off your debt and get out of the hole.
There are two popular methods when dealing with your debt: the avalanche method and the snowball method. With the avalanche method, you are encouraged to settle the debt with the highest interest rate first. This helps eliminate the debt that is costing you the most money. This is a great method for those who have high interest debt such as credit cards.
The snowball method encourages you to pay off the debt with the smallest balance first. When that first debt is paid off, you take the money you put toward it and start paying off the next smallest debt. Like a snowball rolling down a hill, this method helps you build momentum until all debts are paid off. Whichever method you choose, keep making payments on your other debts while you work to pay them all off. Another debt management strategy is debt consolidation (opens in new tab). This is where you roll your entire debt into one payment. Making just one monthly payment on your entire debt can help you get a lower interest rate and pay off those debts faster.
Now more than ever, it’s important to plan ahead for your golden years. No matter how close you are to retirement, preparing for contingencies like inflation will help you live the retirement you’ve always wanted.
A financial professional can help you create a comprehensive retirement plan to meet your specific goals and needs.
This article was written by and represents the views of our contributing advisor, not Kiplinger’s editors. You can check the adviser’s records with the SEC (opens in new tab) or with FINRA (opens in new tab).