Indulgence is practically expected during the holiday season, from food and drink to presents for the kids. But all that indulgence comes at a cost. Finance website Brankrate reported that the average American family will spend $1,455 on food, presents, travel and other holiday expenses. More than a quarter said holiday spending would create a strain on their budget.
If you went overboard this year, don’t worry. With a little work, there’s light at the end of the financial tunnel. Here are a few ways to help recover from holiday debt:
Review your financial state
The most important thing to do is assess your overall financial situation by calculating your monthly budget, along with short- and longterm goals.
“Before you do anything else, it is important to examine your entire financial situation, including your monthly budget,” advised Experian.
Your assessment should include the following:
- Current income
- Debts
- Non-debt monthly bills
- Payment due dates (including minimum payment amounts)
- Short- and longterm goals
Create a payment plan that works for you
Its easy to get overwhelmed when it comes to finances. If paying down credit cards becomes a struggle, try to map out which cards have the highest interest rates.
“Try paying down your smallest balance first so you can see your progress toward eliminating your bills right away,” suggested Experian.
If working out a strategy becomes too daunting, consider getting help from an accredited credit counselor like the National Foundation for Credit Counseling.
Watch your spending habits
If you wanted to lose weight, you’d go on a diet and start practicing a healthier lifestyle. The same concept applies to your finances.
To see where most of your money goes, download a spending summary from your financial institution. Cut down on the most costly luxury items and use that money to pay off debt.
Be careful with pay later options
Pay later options — store credit cards are one of the most common types — allow you to purchase an item now and pay later, often with no interest applied for a certain period. But you have to make sure the repayment fits into your current budget. Determine whether or not you can adjust your finances to pay this off when the payment dates come around.
Money.com broke down some of the benefits — no or low interest rates, quick approval time — as well as some of the risks — increased debt, damage to your credit score — of these products.
