Dealing with holiday debt at the beginning of the year is never fun. But there are a few ways to manage this payment early in the year.
Before you stress out, you should know that many people are going through the same thing. Coming from the Christmas season, a few people are also dealing with the same thing. Sad to say, this is a situation many people face after the holidays. CNBC shares that last year, Americans owed $1,249 on average coming from holiday expenses.
But even if a lot of people are going through the same thing, it does not mean that you should feel confident about it. If you can manage to stay away from it every year, then you would have a better chance of managing your finances However, if you do find yourself in this type of situation, you should not lose hope.
Yes, it is going to be a tough start for the year. Getting that statement at the end of the month can surely dampen your spirit. You might have some plans for the year and you could feel like putting the breaks on them. Money management plays a crucial role in helping you set and actually reach your long and short-term goals. And unnecessary debt is usually a big stumbling block.
This is the reason why you need to get ahead and manage your holiday debt as soon as you can. If you choose to ignore it, it will not go away. No matter how hard you wish for it to go away, it will stay under your name. The worst part of it is that compound interest will world against you. This will make your total payable bigger over time. Here are a few things you can do to help you take control of your debt.
List down all your holiday expenses
When you are faced with financial problems like debt from your holiday purchases, a good first step is to list your debts down. Much like what you do when faced with any problem, you need to have a clear understanding of what you are up against. In this case, you have to know how much you are in the red for with your holiday debt.
A good first step is to list down all the holiday expenses you made in the past month. The goal is to make it as comprehensive as you possibly can. More than just the amounts you need to pay every month, it is a good idea to have all the details on hand. This can include the interest rate on the debt, the payment due date, and even your creditor’s details.
This list will give you a clear picture of what you need to pay every month. At the very least, you will have a clear picture of your debt payments. You can now plug these payments into your budget. The lender details will be a big help in case you need to reach out to them to confirm payment details or even ask for payment restructuring.
Consolidate your holiday debt
When you are faced with holiday debt, there are a number of ways to manage it including debt consolidation. This is an effective debt repayment plan to help you manage debt payments. Especially so if you are trying to juggle multiple credit card debts. Consolidating your debt with a 0% card can give you an edge in debt repayment.
The idea is that you combine all your credit card payments under a 0% card. This way, you save money from interest payments over your repayment period. On top of this, you also only have to deal with one payment instead of several different amounts every month. This can significantly lower the chances of overlooking a payment since you only have one payment due date to keep track of.
However, you need to keep in mind that 0% credit cards come with a promotional timetable. This means that at a certain point, you will revert back to the normal interest rate. With this, you need to finish all your payments within that time period to make the most of a 0% interest rate. Otherwise, you might be back where you left off.
Save early for your holiday expenses
Holiday debt is usually the result of spending more than what you can actually afford. As a result, you are left with debt at the end of the holidays. Starting the year with massive debt can start you off on a difficult path. It can even throw you off your goals early in the year. As a result, you could be left just trying to survive the whole year without reaching your goal.
You really have no choice but to pay back the debt you acquired over the holidays. While doing that, you might want to start saving for the holiday expenses for the year as well. The idea is that the earlier you begin saving money, the more you will have at the end of the year. Also, starting early means you can begin saving a small amount.
One thing this gives you also is the chance to form the habit of saving. If you are able to start setting money aside with a small amount, you can find it easier doing the same thing when your finances improve over time. Once you get used to it, you will soon be doing it without having to think twice about saving money.
Adjust your goals as you go along
As you start the year, you need to have your goals set. But remember that those goals need to be fluid as well throughout the year. Especially so when you are still dealing with and paying off holiday debt. This can make your household budget a little more challenging in the coming months because you need to be on your toes managing your finances.
When you are trying to pay off debt, you need to be extra careful managing your finances. You need to consistently make adjustments as you go along. This entails a little more work but you get to have better control of your finances. The adjustments you make can help you keep your finances from going over the red.
Adjustments can mean if you have extra funds in any given month, you can choose to use that to make extra debt payments or strengthen your emergency fund. If you already know that you will be running short on funds for payments, you can try moving some funds around to help make sure that you meet at least your minimum payment amount.
Look for a side hustle
When you are paying down debt, it is always a good idea to try and increase your income. Looking for a side hustle is always a good idea. An income-positive hobby is a good start in getting extra income every month. If you are going to invest time and energy in looking for additional money every month, might as well be doing something you already love to do.
Holiday debt is a challenging challenge to overcome but you can make smart financial steps to help you pay it off. There are a number of ideas you can explore at the beginning of the year to help you tackle debt and get your finances under control.