A growing number of financial forecasters are now flashing warning lights that a recession is on the way. The Federal Reserve has increased interest rates to fight the highest inflation in more than 40 years.
Whether the recession pulls up on us or not, only time will tell; however, we should take some steps to prepare ourselves.
Lowering our overall debt, especially high-interest debt like credit cards, is essential to making it through a potential recession.
Interest adds up on credit cards
If you don’t pay your credit card balance in full each month, the interest you accrue on your purchases will cost you more than the original purchase.
Paying with cash vs. credit helps you keep your debt in check
It can be easy to get into debt and hella hard to get out of it. In addition to paying more in total for purchases over time, you’re also accumulating more debt if you don’t pay your bills off from month to month.
I don’t know about you, but after I purchase something, I want to mentally move on from it, not to be thinking about it month after month.
Cash makes it easier to budget and stick to it
.When you pay with the cash you’ve budgeted for purchases, it’s easier to track exactly how you’re spending your money.
It’s also an eye-opener and keeps you in reality how much cash is going out vs. coming in from week to week or month to month.
This article is not saying using your credit card isn’t beneficial, but you want to be responsible and have a plan to pay it off within a month or two to minimize your accrued interest.
The goal is to keep your debt low.