WICHITA, Kan. (KSNW) – The new year brings a new set of goals and after all of the holiday spending, paying down debt tends to become a priority for many.
The holiday spending for the 2019 season was projected to exceed $1,000 per shopper, rising by 4% from 2018 according to Investopedia.
Experts say the average interest rate on a credit card is about 17.25%, which is similar to that of an unsecured loan.
One Wichita consumer credit counselor says there are several steps you can take to help you get your credit card balances down and fix your finances.
The first step is prioritizing.
“Sit down and look at their finances, be realistic and honest,” said Jeff Witherspoon, Executive Director of Consumer Credit Counseling Services. “Prioritize, make sure you’re paying the house payment first, vehicle payment next.”
Witherspoon says the second step is creating a spending plan, otherwise known as a budget.
“One of the best tips I try to give people is, even if you’ve gotten into trouble, plan ahead for next year,” said Witherspoon. “It’s January, you have 12 months to set money aside for the holidays next year. If you’re planning on spending, I think the average family spends $1,000 a year, that’s $83 a month.”
Once you have prioritized your payments, and created a spending plan, next, you should prioritize your credit cards by interest rates.
“Look at the interest rates, attack the highest interest rates first and then go down from there,” said Witherspoon.
Some experts recommend paying off credit cards with the smallest balance first, regardless of the interest rate. Witherspoon says this method will work as well.
This process is often called the debt snowball method:
Step 1: List your debts from smallest to largest.
Step 2: Make minimum payments on all your debts except the account with the smallest debt.
Step 3: Pay as much as you can toward the account with the smallest debt.
Step 4: Repeat this process until each card is paid.
To maximize your efforts, Witherspoon says you can do things like restricting some behaviors, such as eating out less.
Here is a list of ways you can tackle debt quicker:
- Cut out unnecessary monthly expenses
- Cut up credit cards
- Take on a part-time job
- Sell unwanted or unused household items
- Look for sales or price compare before making purchases
Witherspoon says another key to preventing overspending is to use cash.
“A lot of times people spend more because they don’t feel attached because it’s just a piece of plastic, so if you can pay with cash, then you see the actual dollars transferred to somebody else and you’re like, ‘Wait a minute, maybe I don’t want to spend that money on that item,'” said Witherspoon.
If you or someone you know needs help paying off debt, Consumer Credit Counseling Services is available. The service is free and funded by United Way.
You can schedule an appointment over the phone or in person. The number in Wichita is (316) 265-2000. If you live outside of Wichita, call (800) 279-2227.