The decorations are down, your in-laws are gone, the kids are back at college … and the stack of credit card bills is piling up. Even though you meant to watch your spending this year, maybe you got a little charge-happy around the holidays.
If you overspent this holiday, the debt you racked up may seem insurmountable right now. But it only takes a few simple changes to start taking care of those holiday bills.
To help you pay off that debt and keep you from ending up in this same credit card bind next year, here’s a six-step plan to dealing with your financial hangover.
- Stop avoiding. Can’t deal with the thought of opening up those credit card statements and seeing just how bad the damage is? Having to face how much debt you’re in can be discouraging. But the last thing you want are late fees and over-the-limit fees compounding your holiday splurge. Take the plunge and open your statements. To keep yourself from feeling overwhelmed, only look at your minimum payments, and put all your focus on making those payments this month. You’ll feel more able to deal with your debt once you’ve started chipping away at it, and you can worry about your total balances later. Once you’ve made a couple payments, when you feel ready, take a hard look at those total balances and work your way up to step 2.
- Take action. Now that you know where you stand as far as holiday debt, start doing something about it. Resolve right now to double your credit card payments or at least pay enough extra each month so your December spending sprees are paid off before the holidays roll around next year.
- Be practical. Ask for gift receipts. While you may appreciate the sentiment behind that pair of argyle socks or set of dangly earrings you unwrapped this year, if it’s not really your style, exchange it for something that is. Besides trading up to a gift you’ll actually use, you’ll also be saving yourself the expense of going out and buying the replacement gift yourself.
- Do your spring cleaning early. Spend a few hours going through stuff you never use — this includes all those Christmas ties and sweaters you just got that are already sitting at the bottom of a drawer. Separate out what you can sell, what you can donate to charity, and what needs to be thrown away. Post your sellable items on Craigslist or eBay, and use any money you make to pay down your holiday debt. If you have no idea what we mean by “post your sellable items on Craigslist or eBay,” ask your kids to help.
- Start a holiday account. If you start saving for December gift-giving season now, you won’t have to rely on high-interest credit cards later. Make it easy on yourself: Set up an automatic transfer that deposits money into your holiday account from one of your other accounts once or twice a month. Then don’t touch that holiday account until it’s time to start your holiday shopping.
- Plan ahead. If you really want to be ahead of the game, set up a holiday budget now to go with your new holiday account. Calculate roughly how much money you’ll need for things like gifts, holiday dinners, and plane tickets for your away-at-college kids.
- Special Holiday Savings Account. Use your holiday account to save for all these expenses. The trick is, once December rolls around, to not spend more than what’s in your holiday savings account or than what you budgeted for.
Save up now, stick to your budget, and you’ll avoid being caught in this position again next year.