How to Manage Debt When Prices Are Rising

Budgeting apps, consolidation and debt payoff strategies offer ways to get organized this year.

By Bethany Hickey

Americans are facing higher prices for groceries, gas and everyday bills — as well as rising anxiety around money as a result. And the answer isn’t to skip your $5 cup of morning comfort. Here’s how to pay down your debt and build your savings when everything around you feels twice as expensive.

First, the not-so-great news

Prices continue to rise on nearly all things consumable, forcing the best of us to think differently about how we manage our money in 2023. 

Your average run to the grocery store has become a real-world case study on inflation, with staples like eggs nearly doubling in price over the past year. In fact, the USDA forecasts that all food prices will increase by 3.5% to 4.5% in 2023.

Add to that concerns around rising gas prices, and it’s no surprise that Americans aren’t all that optimistic coming into the new year: 78% of those surveyed as part of Finder’s quarterly Consumer Confidence Index say they think the U.S. will enter a recession in the next 12 months. Another 64% say that inflation has already affected their saving and spending habits. 

While you can’t beat back inflation, you can take steps to pay down your debts and build cash savings to weather the storm. All without skipping your morning coffee.

4 ways to reduce your debt and manage your money

These strategies can help you take charge of your money and get ahead of money-related anxiety in this time of high inflation. Combine and tailor these methods into an effective strategy that best fits your income and budget.

1. Consolidate your credit card debt.

More than a quarter of Americans surveyed by Finder say they couldn’t manage their budget without a credit card, resulting in an average of $3,380 in credit card debt. 

If you carry high debts on credit cards, a consolidation loan may be a way to reduce your overall interest and minimize the headache of managing multiple cards on your own.

The best consolidation loans offer a lower APR than your average credit card. And, as a budgeting bonus, you’re left with a single monthly payment each month.

2. Consider a 0% APR balance transfer credit card.

A balance transfer credit card is what it sounds like — you move high-interest debt to a card offering a low or 0% APR, saving hundreds on interest.

Top balance transfer cards offer no-interest periods of 12 months or longer, giving you a year or more to pay down your debts without adding to your principal. Look for cards with low transfer fees — typically 3% to 5% of your transferred amount. And keep spending to a minimum to avoid much higher interest that’s applied to new purchases. 

3. Get out from under high-interest debt with the debt avalanche method.

Inflation eats into the purchasing power of your money. And as inflation rises, so do interest rates — especially for credit cards.

The debt avalanche method is a strategy that prioritizes paying off your highest-interest debts to reduce what you owe and stay motivated toward progress. 

With this strategy, you list out and sort your debts by interest rate, from highest to lowest. You focus on paying down your most expensive debt first, making minimum payments on all other outstanding debts on your list. Any extra money left over after paying those minimums is applied to the next-highest debt on the list, month after month, until you’re debt free. 

This method requires more patience than the debt snowball method — a parallel strategy that focuses on paying off your smallest debt first — especially if you have large balances. But it could save you heavy interest and make the most of your money in the long run.

4. Get on track with a budgeting app.

When you’re ready to ditch the spreadsheets, you’ll find a world of budgeting apps that do more than simply track your spending. Many apps offer additional perks to budgeting, like keeping tabs on your bills and learning how you use your money to offer proactive tips to save and build better financial habits. 

A free app like Stash or Mint may be all you need to get started, though the sophistication of paid apps like YNAB (You Need a Budget) and Charlie can more than pay for themselves if you need stronger support toward your goal. 

Little changes can add up

Avoiding avocados on your toast probably won’t help battle the impact of inflation on your wallet. Instead, build a plan that involves tried-and-true debt management strategies on a path to savings and more stable finances.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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