Thanks to instant one-click online shopping and credit cards, it’s easier than ever to make purchases these days. And, when you pair this convenience with the holiday season, many shoppers find themselves up to their ears in debt by the time the holiday season closes.
So, if you’ve found you overspent during the holidays, here’s what you can do:
1. Make a Thorough Recovery Plan
Each person’s recovery plan will look a little different. However, if you managed to go a little overboard with your credit cards or online shopping this past holiday season, you’ll want to start quickly on your recovery plan.
First, open your December bills and take a peek at what kind of debt you accumulated. With the rush of the holidays, it’s easy to forget the purchases you made at the beginning of the season. Once you have an idea of the amount of money you spent, create a plan of action for tackling the debt.
2. Consider Debt Consolidation
Debt consolidation allows you to combine several high-interest credit card or short-term loan balances into a single, lower-rate loan. There are a couple of ways to consolidate debt effectively:
- Personal Loan: A personal loan typically offers lower rates than traditional credit cards. Plus, these loans have set repayment terms. This means that you’ll likely pay less interest than merely making minimum payments on a credit card, and you’ll know exactly when your debt will be repaid.
- Credit Cards: If you have several high-interest credit cards, transferring the balances to your lower-rate credit union credit card can help you significantly reduce the amount you pay in interest. Plus, by consolidating into one credit card, you’ll only have one monthly payment to manage.
3. Make Aggressive Payments
If you want to eliminate your debt quicker and pay the least amount of interest possible, your best option is to map out an aggressive repayment plan. Through a paying-down strategy, it’s best to start making payments on your lower balance accounts first. This will help you build confidence as your debts disappear. Once one debt is repaid, move onto the next. However, be sure always to pay more than the minimum payment each month. The minimum payment will only pay the interest due and not the principal. As you pay down each account balance to zero, your credit score will also begin increasing.
4. Create a Budget
If you’re looking to eliminate debt, a budget is a must. Go over your last year’s account statements and identify areas you can cut back. Then, apply these savings to your debt. Once you eliminate your debt, take that extra money, and start putting it into a savings account.
5. Begin Saving Today for Upcoming Holidays!
It’s not fun having to audit your credit cards and consolidate your debt. But it’s something you have to do if you’ve managed to overspend this holiday season.
You can prevent these challenges by opening a separate Club Savings Account at the credit union. A Club Savings Account allows you to stash away money throughout the year, specifically for a set goal such as holiday spending. Right before next year’s holidays, you can transfer your accumulated balance to your savings or checking account for holiday shopping.
We’re Here to Help!
Everyone overspends from time to time. Nobody is perfect. The best thing you can do is get back on financial track as quickly as possible and create a plan to prevent yourself from having to go through this again next holiday season.