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 holidays are over, leave the credit card at home. If you can’t afford to pay for an item with cash then leave it at the store. 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 indicates people who pay with cash will spend 20% less than people who use credit. Using cash can cut back substantially on frivolity.
Budgeting post-holiday season is crucial
Finding a workable budget is also important to getting out from under Christmas debt. Experts warn that budgeting isn’t always fun. It can actually be hard to assess what’s coming out versus going out every month. 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 important to note everything from a big-ticket item’s 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 changes that are necessary to reach your goals.
Check out the paperwork
Finally, it’s important to take time to look at paperwork that may reveal money drains. Reviewing your tax withholding on your W-4 form can show you whether or not you are deducting more than you should every month. Reading credit card statements can tell you if there are any charges you aren’t 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 key to overcoming it. It may take a few months, but paying it down will save money in the end. When your credit card statement shows a balance of zero, you will be thankful you conquered it.