Following the holiday season, Americans found themselves with an average of $1,000 of debt in 2017, according to Magnify Money’s annual holiday debt report.
Ouch. That’s a whole lot of debt for one month of festivities.
While planning and budgeting before the holiday season can prevent a lot of financial woes, many people figure this out too late.
If you’ve found you have overspent this holiday season, there are a few steps you can take to regain control of your finances.
1) Review Your Spending
First thing is to assess the damage. Before you can dig your way out, you need to know just how deep of a hole you are in.
Take time to calculate your total spending, how much you owe, and any bills that you may still need to pay.
2) Prioritize Any Debt
Next, take a look at any credit card debt you may have accumulated during the holiday season. Since credit cards have such a high interest rate, you will want to prioritize paying these off as soon as possible.
Work with your credit card company to figure out what your minimum payment needs to be each month. Keep in mind, by just paying the minimum, you may not be able to be out of debt for several more months. If you can, you will want to pay more than the minimum towards your credit card debt
And remember, it’s going to be even more challenging to get out of debt if you continue to put a balance on your credit cards. Sock them away for the time being, at least until you regain control of your financial situation.
Next, you’ll want to make sure you are paying at least the minimum payment each month, but depending on what your balance is, sticking to the minimum payment could cause you to spend several long months paying off your debt. Any extra money you can put towards your credit card debt will go a long way.
Lastly, if your credit card has a high interest rate, consider transferring your debt to a card that offers a 0% APR. There are a number of cards that offer a 0% interest on balance transfers. See some options here. This way, your payments go further since you won’t have to pay anything towards interest.
3) Assess Your Budget
To pay back your debt, you may need to really examine your budget. By moving some of your budget line items around, you can allocate more to your debt repayment.
If you have any late payments, or soon to be late, you will want to prioritize these first in order to avoid a hefty late fee.
As you look at your budget, consider how you can track every dollar you spend. That way, you can ensure you are actually sticking to your financial plan.
4) Cut Out Any Unnecessary Spending
Are there any budget areas you can cut out entirely, at least for the time being?
Consider cutting out budget categories, such as eating out, shopping, cable, and more. By putting a freeze on some of your unnecessary spending, you can quickly free up more cash to use to pay down your holiday debt.
5) Return Any Holiday Gifts You Do Not Want
Did you receive any gifts you don’t need or want? Don’t feel too bad – most loved ones would rather you return the gift to receive credit for something you really do need.
Not every store will give you cash for returns, but you can usually get store credit or gift cards to use towards purchasing something you really do need. This can help to lower some of your other expenditures while you’re paying off your holiday debt.
And if you bought something for yourself, now is the perfect time to evaluate whether or not you really need it. If you lost the receipt, you can always consider selling it and using the cash to lower your credit card bill.
Bonus: Earn Extra Money
And lastly, it never hurts to consider ways you can make more money. Not only can extra cash help you recuperate after the holidays, but it really can better your entire financial situation for the long-term.
Have you ever wanted to start a side hustle? You can babysit, freelance, sell homemade goods, tutor, blog, or something else. You can use all of the income you make from that to pay off your holiday debt or pad your bank account (just be sure to save some for taxes).
And if you received an end of the year raise or bonus at work, you can put that money to work as well by paying down debt or rebuilding an emergency fund.
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Great post thanks for sharing.
I really need to implement some of these tips after this holiday season.
Hope you don’t mind but I’ve shared this on Twitter :).
Cheers
Marco
really interesting