The post-holiday period can be challenging for many reasons, especially for your wallet. Between recovering from holiday purchases, attending events, traveling, and preparing for the upcoming tax season, your budget may feel stretched thinner than ever. But holiday spending doesn’t have to put your finances in a long-term hole.
There are many strategies you can implement that will lighten the financial load. In this article, we’ll help you bounce back from holiday spending and start the new year off on the right track.
Assess the Damage
The first order of business to recover from holiday spending is to evaluate the situation and determine where you currently stand. Start by reviewing your account statements and transaction histories. Determine if and how far your budget strayed over the holidays. Then, pinpoint the amount you need to repay to get your finances back in order. Once you have a clear view of your current financial picture, you can make a game plan to help you get back on track.
Get Your Budget Back on Course
To help your budget get back in shape after the holidays, it is necessary to prioritize your essential expenses. Start by identifying your needs versus your wants. Reassess your non-essential expenses and consider making some cuts. Even if the cuts are only temporary, any reductions in spending will help free up funds to pay off debt.
If you relied on high-interest credit cards or other costly financing tools, this step is especially important. Every dollar of high-interest debt you eliminate puts you in a better financial position. Otherwise, the interest charges could follow you well into the new year.
Consolidating High-Interest Debt
If trimming your budget doesn’t yield enough to eliminate your holiday spending, don’t worry. There are two options that can significantly improve your financial outlook – both involve debt consolidation.
Debt consolidation is the process of combining multiple high-interest loans or credit cards into a single, more affordable loan. It’s much easier to manage one loan versus several, and the lower interest rate makes repayment much easier (and often quicker).
- Debt Consolidation Loan:
A debt consolidation loan is like a personal (or signature) loan. Your outstanding personal loans or credit card balances will be paid off and transferred to a new loan – usually with a lower interest rate. You’ll make a single monthly payment on your loan, much like a car loan. With set payments, people often pay the debt off quicker (and with less interest) than by making minimum payments on a credit card.
- Credit Card Balance Transfer:
Another type of debt consolidation utilizes credit cards. With this tactic, you transfer high-interest credit card balances to a lower-rate credit card. Instantly, you’ll save on monthly interest charges. The main drawback of this strategy is that you still have the option to only make minimum payments on your new card – essentially causing the debt to become longer-term.
No matter which post-holiday debt consolidation method you choose to pursue, the end goal is the same – to simplify your debt repayment and pay less interest overall.
Give Your Credit Card a Break
It can be a good idea to avoid or limit using your credit card for a few months after the holidays while you work to get your budget back on track. You can store your card away temporarily, so you don’t feel tempted to use it.
Alternatively, give yourself a monthly cash allowance for non-essential expenses. Then, opt for cash-only transactions until your budget has recovered. By putting your credit card on a spending hiatus, you can avoid increasing your balance, which could increase your monthly interest charges and lengthen how long it takes to pay off your debts.
Consider a Spending Cleanse
Can you go a day without spending money? What about a weekend? Or even a whole week? Take care of your necessary purchases, like paying bills, filling up your gas tank, and getting groceries. Then, challenge yourself to see how long you can go without spending any money. It’s tougher than you might realize, but it’s a great exercise to help you reign in your spending! It’s also eye-opening just how often you spend money without even realizing it.
Plan Ahead This Year
The best strategy to avoid encountering any spending mishaps this year is to plan ahead as much as possible. One of the most effective ways to do this is to establish a designated holiday savings account. This way, you can ensure you have your holiday spending covered when the time comes.
You can contribute to your holiday fund throughout the year by setting up automatic transfers and depositing any extra money monthly. Then, when the holidays roll around, you won’t have to scramble or rely on high-interest credit cards. Instead, you’ll be able to enjoy the season knowing you have all your financial ducks in a row.
We’re Here to Help!
Now that the holidays have come and gone, you can focus on getting your finances back in shape. By following these tips, your budget will bounce back before you know it.
If you want to learn more about debt consolidation and how it can help reduce high-interest balances, we’re ready to help. Please stop by any of our convenient branch locations or call 800-782-4899 to speak with a team member today.
Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents.