BALTIMORE — Are you still on track with your New Year's financial resolutions? As we reach the halfway mark of the year, it may be time to reassess your financial goals.
Loyola University Maryland Accounting Professor JP Krahel recommends starting your mid-year money check-up by tallying up all your debt.
“And that may be a harder thing than people want to do because that involves, you know, gritting your teeth, and checking your credit card balance and checking your bank account,” said Krahel.
Once you know how much you owe, the next step is prioritizing debt with high interest rates.
“Usually, it's between 15% and 30%. And that doesn't sound like much until you start seeing the math you start realizing, oh wow, this can really compound very quickly,” Krahel said.
He added that it's not enough to make minimum payments.
“But if you're in a situation where you can't afford to pay off the full debt, one pretty quick step you can take is to see if it can be refinanced, whether that's as a personal loan or as a different credit card balance transfer. It's all about the over under between interest rates and costs,” Krahel explained.
Debt management plans force participants to give up those credit cards.
READ MORE: How a Maryland woman paid off $70,000 in debt and lost 50 pounds
Balance transfers can help offset interest, but if you don't change your habits, Krahel said it’s easy to fall back into the same cycle. And with holiday deals, it’s important to take steps to avoid frivolous spending.
“It is easier to start a diet by not buying food than by buying it and having to turn it down. Delete the app. If you're going to be tempted to say I wonder what the deals are right now, it takes a lot less willpower to delete the app once, then to every time you turn on your phone screen, to be like, nope, not going to look. Nope, not going to look. Eventually, it's going to wear you down,” said Krahel.
When you’re not paying down debt, make your money work for you in the long-term. The rule of thumb with retirement is to match your company's 401(k) contribution dollar for dollar.
“It's free money, right? If it's 5 percent, great, I'll do five. If it's three, I'll do three, whatever it is. And the good thing is that money leaves your paycheck before it gets to you,” said Krahel.
Build an emergency fund with 3 to 6 months of essential living expenses, but Krahel warns that debt is also an emergency.
“If you have $1,000 and $1,000 in credit card debt, and you put that $1,000 aside, your credit card debt is going to reach $2,000 pretty soon. I would rather have nothing than be underwater,” Krahel said.
And whenever the Federal Reserve raises interest rates that can increase your credit card interest rate. While rates remained steady in June, they’re likely to go up again adding more urgency to getting rid of any debt.
To create a budget and better track your spending, click here to download a spending tracker.
And this cost-of-debt calculator allows consumers to see how expensive their debt will become with the current balance, interest rates, and how long it'll take to pay off.