Ridding Yourself of Holiday Debt
Time to deal with holiday debt
Now that the holidays are over, many Americans are mired in debt. Sure it was easy to pull out credit cards for expenses, but now is when the credit card bills are coming in. Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, said, “It will only get worse as the bills continue to arrive…putting it off will only result in ruined credit and more stress.”
One of the most important tips the National Foundation for Credit Counseling gives to all its clients is to set a goal date when holiday debt will be paid off. Cunningham said, “Setting a goal date like March 31, for example, can give you a clear picture of what you have to do to pay down debt.”
Credit cards and the future
When you are trying to get out of debt, it is important to stop purchasing on credit. Though small purchases seem easily handled by plastic, they add up quick. Cunningham also instructs her clients that stretching out debt payments as a result of a holiday spending spree, only negates savings. Once the season is over, leave the credit cards alone. If you can't pay for something in cash on the spot, move on. Lynn Mayabb, financial planner at BKD Wealth Advisors said, “It is much harder to pay for something if you have to pull cash out of your wallet.” Research shows that people who pay with cash end up spending about 20% less than those who use credit. Using cash might make you cut back a lot on frivolous purchases.
Budgeting post-holiday season is crucial
Finding a workable budget is also important to getting out from under Christmas debt. Experts caution that budgeting isn't always enjoyable. In fact, it can be a difficult task to honestly assess what comes in versus what goes out on a monthly basis. In the end, it's the only way to get an accurate picture of where your money is going, and what you need to change.
The best way to start a budget is track every expense for the month. Cunningham said, “It can be as intricate as buying a software program to help you track expenses, using a spreadsheet or getting a notebook for 99 cents." It's also vital to note everything from a big ticket purchase, to a cup of coffee. You want the most accurate picture of the month's finances as possible. That way you can make the necessary changes to realistically reach your financial goals.
Check out the paperwork
Finally, it’s important to take time to look at paperwork that may reveal money drains. Review your tax withholding on your W-4, and it can show you if you're deducting more than you should per month. Reading credit card statements can show you if there are additional charges you were not aware of. Cunningham said, “You’d be surprised at how many people are unaware of a $ 9.99 charge to their credit cards that came with a free-trial. Sure it may not sound like a lot, but over the course of a year, that adds up to almost $ 120.”
No debt is good debt
Debt is something that can easily grow out of control during the holiday season. It's an expensive time, and there's a lot of stress that goes with it. Addressing debt early on is the key to getting rid of it. It might take a few months, but paying it off will save money long term. When your credit card statement shows a balance of zero, you will be thankful you conquered it.
Tags: address debt, budget, check out financial planner, holiday debt, holiday season, paperwork pay off