Holiday Debt Blues
You’ve opened the gifts, and now it’s time to open those post-holiday credit card statements. While the situation can be stressful, there are many ways to recover from last month’s spending frenzy.
Everyone loves the thrill of being able to spread a little holiday cheer. The smiles on the kids’ faces make it all worthwhile. Buying something extra special for a loved one during the holidays is all part of the magic. But it comes with a price-tag, doesn’t it?
Just like getting back into those favorite jeans after the holidays doesn’t happen by accident, getting financially fit after the recent shopping season takes a serious plan and an even more determined effort to see it through. This year’s holiday debt in America will probably be higher than 2017’s average of $1,024 per consumer, due to the positive outlook many have about where this economy is headed.
About 25 percent of consumers say it will take six months or more to pay off their holiday spending.
But how successful were you in knocking out all that debt last time? Are you still paying for it? If so, you’re probably wishing you had done something different.
There’s no shortage of good advice out there about tightening your belt and making a plan to pay off those debts. But one big, really important point to factor into your plan is that not all holiday bills are created equal. Some can even damage your credit or financial stability if you don’t get a jump on paying them off now.
This year, attack that mountain of debt with all you’ve got by heeding these few simple tips.
The first tip won’t help much this year, but the biggest way to overcome the holiday debt blues is to avoid it from the beginning. Make 2019 the year that you purchase holiday gifts throughout all 12 months. Include gift spending in your monthly budget. That way, you don’t have to use credit debt in the final two months of the year. However, if you’re in the same boat as millions of other Americans, who loaded up the credit card bills this holiday season, this next step is an absolute must for digging your way out.
Know what you’re up against
If you’ve used more than one charge account, add up everything from every card, so you can know what you’re up against. You can’t beat your opponent if you don’t really know your opponent. Don’t avoid doing this for another day. Get out all your card statements and add it up. Now, look at the interest rates for each card. The ones with the highest rates are the ones that will kill you the most in the long run.
After figuring out how much you owe to the credit card companies, it does you no good to keep using their cards. Stop spending money you don’t have or you’ll never see your debt diminish. For example, if you have seven credit cards, commit to canceling all of them but the one you’ll use in the future for emergencies. Keep the one card, seal it in an envelope marked “emergencies” and put it in your sock drawer. From now on, if you need to spend money on anything, stick to your debit card until you’ve beat down your credit card debt.
Negotiate a lower interest rate
Credit card interest rates can be notoriously high, and higher still if you’ve had a late payment. Sometimes creditors are willing to cut you a break if you simply ask. Your card company wants to keep your business, after all, and now is when competitors unleash their most attractive balance-transfer campaigns.
Start with the small fish
Paying down credit card debt on multiple cards happens quicker when you pay the minimum balance on all the cards except the one with the smallest balance. Use the bulk of your debt-canceling funds to eliminate the card account with the easiest balance to tackle. When that entire card balance is gone, you’ll never have to pay another dime to that account. Now you can do the same with the card that has the next highest balance. You’ll find that your holiday debt will disappear faster that way.
Get some debt dismissed
This is not as far-fetched as it sounds. Many companies are getting realistic. They’d rather take 25 percent than nothing. You probably don’t want to go down that road alone, however. It is an extreme decision, fraught with lasting perils. And if you’re attempting to score waivers as part of a debt settlement plan, the process can drag on for months. Consolidating debt is a more credit-score-friendly approach.
Send small payments
Noting the sleeping habits of interest — it never sleeps, adding incrementally every day to every extra dollar on your debt — should affect your repayment decisions. Rather than wait until just before the due date to send your installment, thereby allowing interest to nibble away like termites at your future earnings, send payments when you have the money. Every $25 you pay two weeks early is 14 days of interest charges saved. Over time, that can add up.
Use your time wisely
Most of us calculate how much money we can send to the card companies every month based on regular 40-hour work weeks. But there’s another 128 hours a week (or, 512 per month) you could be using to earn extra cash on the side. Even a $10 an hour part-time job a few hours a week could take care of the minimum payment on a card. But what if you were to put in an extra 20 hours a week at a $15 an hour job? That’s about $250 a week after taxes. Do that every week and you can cancel an extra $1,000 of credit card debt in only one month. Moonlighting is the quickest and easiest way to eliminate credit card debt for good.
Use your refund as a reward
When used wisely, your tax return can become a powerful tool for getting your financial situation sorted out. Reward yourself by using the refund to get rid of those holiday debts. Who knows, maybe you could eliminate the whole thing. You’re really rewarding yourself by destroying all those holiday debts. Taking your refund and using it to eliminate holiday debt could potentially save you hundreds of dollars, maybe thousands, in interest and all the other insane fees.
Just do something
Maybe working an extra 80 hours a month at a part time job isn’t your thing. Maybe taking that nice big tax refund and sending it all to the credit card companies isn’t too appealing either. Understandable. But, your holiday credit card debt isn’t going to shrink on its own. You’ve got to at least do something to make a dent in it. Maybe start by skipping that $5 piece of pie after dinner. Replace a workweek lunch at a restaurant with a sack lunch five or six times throughout the month. That can save a whole lot over a few months. Just think of something and stick to it. Then see if you can improve on it. Before you know it, you’ll be saying goodbye to that old, ugly holiday debt and hello to a new and better way of spreading holiday cheer in the coming months, debt free.
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