Shedding extra pounds is a popular New Year's resolution, but what about shedding some of that extra debt? With the Christmas shopping season over, millions of Americans will soon get that first post-holiday credit card bill, and they could be in for some sticker shock. "The Federal Reserve just raised benchmark interest rates in mid-December, so a lot of consumers are going to see that higher rate reflected when they get their January credit card statements," says Greg McBride with Bankrate.com.
Those higher interest rates aren't good for Americans already bloated with debt. A Lending Tree.com survey finds 4-in-5 Americans have some sort of debt. And many of them just got done adding to it. "Particularly if you went a little overboard during the holidays, that tends to be debt that you accumulate at a higher interest rate," says McBride. Last summer, total U.S. household debt reached a record $12.8 trillion.
You obviously can't tackle all of your debt at once, but McBride recommends making the highest interest debt--such as credit cards--a priority. "You have to absolutely develop a game plan to get that paid off as quickly as possible, and then start setting money aside for next year," he says.
While paying off current debt, you can avoid incurring more of it next year by putting money away during the year. "Take a close look at what you spent (on the holidays) this year," says McBride. "And then take that amount, divide it by twelve, and start saving that amount of money every single month throughout the year...There's no reason that the holiday season should sneak up on you."