What Are the Best Ways to Pay Off Debt in the Post-COVID Economy?
Many people are coming out of COVID lockdowns in worse financial health than they were in 2019. Whether it was for self-care or just social distancing, the purchasing habits of a significant portion of the population began to skew towards more impulsive and less prudent. Consequently, the amount of credit card debt out there has never been higher.
If you’re someone who feels like they need a financial reset, we’re here to help. Here are a few ways you can shed that COVID credit card debt as quickly as possible.
Create a plan to get out of debt
The first step you’ll need to take is to create a plan for how you’ll tackle the debt load you’ve acquired. There are a few popular methods you can use, such as the debt avalanche, but many find the debt snowball to be the easiest to start. If you’re wondering why, read how does debt snowball work?
Don’t get overwhelmed by all of the different strategies; any strategy you opt for is better than no strategy at all. Pick a technique that feels the most attuned to your lifestyle and how you like to achieve goals. Don’t opt for a payment strategy that makes things more difficult because you’ll just avoid doing the work.
Update your budget for the post-COVID world
During lockdowns, you may have spent more money on take-out food and online shopping. Now that restrictions are being lifted, it’s time to look at how you’ve been spending money and change your purchasing habits for the post-COVID world.
Look at the past three to six months’ worth of statements from your bank and credit cards to see what spending categories have gone beyond your pre-pandemic budget. Once you notice these patterns, you’ll need to decide what purchases are worth continuing and which ones need to be changed.
If you need to start a new budget from scratch, that’s fine. Begin by collecting your typical monthly bills and tallying them to see how much you have to spend to keep yourself afloat. From there, add a category for savings (especially if you don’t have an emergency fund) and for paying off debt. Whatever money is left can be spent however you like. The crucial part here is to reset your purchasing habits to stop the cycle of accruing more debt and become debt-free as quickly as possible.
Be patient
The global pandemic has been traumatic for everyone, even if you haven’t lost loved ones to COVID. You went through a time of severe stress and coped the best way you knew how. If that meant taking on more credit debt, then so be it. Forgive yourself for your past mistakes and prioritize treating yourself and your finances better going forward. Your debt most likely didn’t accrue all at once, so accept that it may take more time than you hoped to become debt-free. Give a few tips some thought and look at what small changes you can make today to be debt-free soon.
