The holiday debt hangover is real and unfortunately, a lot of consumers deal with it year after year. This is similar to drinking too much alcohol and waking up with a bad headache the next morning. People usually deal with this by simply rehydrating, getting some crackers or even some occasional painkillers. However, things are not so simple when the same concept applies to your finances.
It gets a lot more complicated because your finances are still reeling from the effects of holiday spending. Similar to how you drink too much, there is a big possibility that you spent too much. To make the holidays more interesting, most consumers did not have one for holiday shopping. This was from a recent survey conducted by LendingTree.com showing more than half of American consumers ditching a budget for the holidays.
This is an easy recipe for holiday debt hangover where impulse meets an unprepared budget. Holiday shopping might seem like an easy task but it can really be deceptive. Even for those who came up with a list and budget, it was very challenging. A few exceptions on the list and they end up over budget. What more for those people who did not even have a budget, to begin with?
In light of these scenarios and the possibility that a lot of people needs help with their finances, there are ways to address holiday debt hangover. There is no such thing as a miracle step that cures all your financial problems post-holiday spending. There is no blanket solution that will work for all events but there are ways to make it better. Here are some of them.
Check your spending versus budget
The first step in any problem is accepting there is a problem and figuring out how much trouble you are in. When it comes to managing debt after holiday expenses, you need to accept first that you are in the red because of uncontrolled spending. It can be from impulsive buying, not having a budget, misusing your credit card or a combination of these factors. You then need to identify just how much you are in the red. This gets you face to face with the actual and immediate financial problem. The sooner you get to identify the problem, the faster you can think of ways on how to solve them.
Pay your credit card bill in full to offset holiday debt hangover
There is a big chance that you relied heavily on your credit card during your holiday shopping. This is truer when you do not have any budget, to begin with. You are relegated to using whatever available credit you have simply because you did not plan for the expense. This got you over the first part which is buying the gifts. Now comes the hard part, paying for all of them. As you would be receiving your statement towards the end of the month, it is ideal to pay for the whole amount. Leaving a small portion behind your card balance could activate several fees and charges on your next payment. This can dramatically increase your payment amount and put you in the red.
If not, pay more than the minimum
As you look at your holiday debt hangover and realize you are already way in over your head with payments, you start looking at band-aid solutions. This would get you out of the doghouse for now and you are content on dealing with what comes next. One perfect example is settling to pay just the minimum amount on your card. It allows you to make a payment on your card and clears your conscience of any late payments. However, your minimum payments will actually allow your lenders to start charging ridiculous fees. These completely avoidable charges would not exist if you simply pay the full amount. But in cases where you are unable to do so, endeavor to pay above the minimum amount. This helps you pay off your balance a lot faster and helps you save money from interest payment. This is one of the ways minimum payment kills your finances.
Know where to make adjustments as you make the payment
When you need to make continuous payment on your holiday expenses, there is a big chance you have to make cuts somewhere else. Offset over-budget spending by cutting elsewhere will seem to be the most appropriate solution to accommodate extra monthly payments on your budget. This is easier said than done especially if you are already running a tight budget. The best place to get started is to look at your wants list. You would need to move them back or reallocate funds to meet new payment details.
Look at your card rewards and use them
Nerdwallet.com shares some of the best performing cards on the market in a recent article. However, the benefits are relative to what you need as well as your lifestyle. There are specific cards that would serve you well if you travel a lot either by land or air. There are also cards that reward you beautifully when you frequently shop online. These travel or cash back rewards should be something you take advantage of. They can help you reel away from holiday debt hangover and onto sound financial management practices,
Try returning items bought on impulse to lessen holiday debt hangover
There are a few ways to shop smart and one of them is returning or exchanging items. This is a helpful tip especially when you got caught up with impulse purchases. Great store deals, as well as tempting sales programs, can get you hook, line and sinker. You might feel better when you shove these items away in the basement never to be seen again. But if you think about it, it would be a lot better to return the item and get your money back. You might also have it exchanged for an item you actually need and have a use for.
Keep those cards away or trim the number of cards you have
One of the possible reasons for your holiday debt hangover is having a lot of credit cards to choose from. It added to the allure of spending over the holidays because you had a lot of credit to spend. This is one pitfall consumers experience with having more credit cards than they need. They start believing that they have more money they can spend. Wherein the reality is that they simply have more pre-approved short-term loans to use up. One way to deal with this is to cut down on the number of cards that you have. Be sure to maintain the ones that have been the longest. The payment history on those ones would positively contribute to your credit score. Give up the newer ones with high-interest rates to trim down temptation.
Budget for next year’s expenses
Creditloan.com shares that one of the biggest expenses people have in their budget would be housing. This entails either rent or mortgage payment depending if you have yet to buy a house or paying down on your own property. With this in mind, it might be a good idea to get started with a budget for the coming year. You can use your existing budget for this year as a take-off point. Look at what your income and expense items are and determine if they need to be updated. Additional income sources or extra expense payment needs to be reflected in your budget. With the looks of holiday debt, there is a big chance your expenses would grow. Make improvements on your existing budget to make it better for the coming year.
Holiday debt hangover can be a real challenge for your finances. However, there are ways to manage them as well as prevent it from happening again.