- Gather your bills and receipts; know how much outstanding balances you have.
- Consider reining in your discretionary spending while you focus on maximum debt reduction.
- A holiday bonus or big tax return could be a windfall.
Most of us try all year long to stay on the path of financially responsible behavior — we stick to budgets, pay down our debt, and plan ways to boost our credit scores.
And then the holidays hit.
It’s a common problem for many consumers, as restraint goes right out the window when everything seems like it’s on sale, especially during the mega-offers on Black Friday and Cyber Monday. Some of those deals are just too tempting! That’s likely one reason that a recent Consumer Reports survey found 34 percent of respondents said they spent more than intended during the holidays in 2015.
Unfortunately, overspending can put your finances into a bind that might take some time to unravel. But it’s not impossible — now’s the time to follow some simple tips to limit the damage and get your finances back on track if you overspent this past holiday season.
Here are a few suggested strategies:
Assess the damage
The first step to getting out from under new financial burdens is to get an accurate report of where you stand. Accumulate all of your holiday spending receipts as well as your latest credit card bills. Make sure all charges are accurate. This may also be a good time to practice an annual financial check-up by requesting a free copy of your credit report, which can give you an up-to-date picture of your credit score. (Get your free credit score here.
It’s OK to return unwanted gifts
Was every holiday dollar you spent worth it? It’s likely you didn’t use everything – and it’s even more likely you didn’t like everything you received. If you can escape hurting any feelings, consider returning any unwanted gifts in exchange for cash in your pocket.
Put away the plastic
If you spent way more than expected this past holiday season, it’s likely that a good chunk of your spending went on your credit card. It might be time to invoke the physician’s credo: Do no (more) harm. See if you can go a month – even two – without racking up any additional charges. Pull out your debit card first, or even use cash. Some people even give their cards to family members to hold or hide away until the self-imposed moratorium has ended!
Tighten your belt
You can increase the speed of your financial recovery by temporarily cutting your discretionary spending. Think about whether any of your budget dedicated to entertainment or eating out can be ratcheted back while you focus on paying off your new debt. This can be a great time of year to explore cheaper things to do, like free museums or literary events, as well as planning rotating pot-luck dinners with a group of friends instead of dining out.
Say no to minimum payments
This goes for all of your credit-card debt, not just what you’ve recently charged over the holidays. Do all you can to pay above the minimum requirements for all your cards. Paying the minimum simply drags out your goal of being debt-free by saddling you with extra finance charges. If your debt burden is particularly large, consider “snowballing” – paying down the debt balance with the highest interest rate while paying the minimum on lower interest rate debts. Once you’ve paid off the highest interest rate balance completely, move on to the next highest interest rate balance.
Consolidate your debt balances
If you’re weighed down by multiple cards with high-interest rates, you could find relief by transferring your overall balance to the card with the lowest fee. Better yet: try finding a new credit card offering a zero-percent teaser rate that could give you up to 18 months without new finance charges (though you’ll likely pay a small percentage for a balance-transfer fee). But read the fine print before signing up, because some teaser rates may revert to rates higher than your current cards.
Finding money in somewhat unexpected places
Getting a Christmas bonus this year? How about a big tax return? Both can bring significant sums of funding to put directly toward a debt payment without derailing your current budget structure. By filing your taxes as soon as possible, you can save yourself a few months of finance charges.
Plan for next year
Ideally, this will be the last time the holidays hurt you financially. One way to help those chances is to make a spending plan for next year and sticking to it. You can start a holiday fund in your savings or checking account by diverting a portion of each paycheck all year long. By the end of the year, you’ll spend your saved cash, and not dig yourself into a debt hole.
Just like with holiday food and drink, it’s sometimes tough to keep a strict limit on your spending as it is with eating and drinking. If you’ve piled up excess debt, focus on reducing it as soon as possible, while setting up a plan that helps you avoid spending too much next year.