Need help recovering from your holiday spending? Use these powerful, yet simple steps to pay down debt and get back on track.
Did you go a little overboard with holiday spending this year? You’re not alone.
It’s hard to resist the temptation to overspend when buying gifts for your family and friends, especially when so many retailers offer deep discounts. If you find yourself with newly added credit card debt, you can use one or more of the following methods to dig yourself out.
Add Up Your Seasonal Costs
The first step is to calculate the exact amount of your holiday debt. This not only allows you to make a repayment plan but also establish a limit for the next holiday season.
Understanding what you spent is helpful for planning ahead. Depending on your budget, you may need to start saving more or plan to spend less than you did last year.
Tackle Higher-Interest Debt First
Not all debt is created equal. You’ll pay more in the long run with high-interest credit cards. Start by identifying your most expensive credit card balance. Then, pay the minimum on your other cards and roll any extra money into your payment for the expensive card. Once it’s paid off, focus on the next most expensive card, etc. You’ll save money by paying less interest over time and move closer to being completely debt-free.
Reorganize Your Budget
If you’re struggling to get ahead of your seasonal debt, you may need to take a long, hard look at your budget. If you’ve never made a budget, the beginning of the year is a great time to start! Can you eat out less or make coffee at home instead of buying it every day? Identify areas where you can save and apply the extra money towards the costs of those holiday purchases.
Don’t Spend More Than You Earn
This classic rule of personal finance is classic for a reason – it works. We all have good intentions when it comes to saving, but it’s easy to fall into the habit of using your credit card when you want to buy something but don’t have the cash.
Bottom line? If you don’t have the money, don’t spend it. Create a budget that outlines your bills and saving priorities then make a plan for the funds that remain.