Even though all of the Christmas presents have been unwrapped and put away, for many people, the financial implications of spending around the holidays spill over into January. And as we all know the effects can spill over way past January, where holiday spending can be a burden throughout the entire year.
I’m here to tell you that there is hope, but if you want to get your financial house in order, it’s time to start now. This month. Not next month. Get started in January.
Here are a few things that you can do to get out from the burden you might feel from your holiday spending, and more importantly, set the table so that you don’t find yourself burdened next year.
- Determine your exact financial position – Surprisingly, many people who have bills due from holiday spending can’t tell you exactly what those bills total up to be. If you don’t know what you owe, you’ll never be able to set a path for how to pay off those bills. Look at all of your credit card statements and put together a total on what you owe.
- Figure out how long it would take to pay off those bills without any changes – If all of your income, your expenses, and bills stayed the same, figure out how long it would take to pay off your credit cards at the current rate. If it’s a month or two, then work to stay in those lines. For many, however, it is a much longer prospect. This is where you really need to make some changes.
- Review your expenses – Take a look at your expenses. Look at every bill and ask yourself if you can eliminate it or trim it. Can you cut some cable channels? Can you turn the thermostat down a degree or two? Can you cancel a subscription service, whether it be a magazine or Netflix or something else? Apply the money you save directly to the money you owe.
- Lower your interest rates – Do you know what your interest rates are on every loan you’re paying? Whether it be your mortgage, your car loan, or credit cards, if you’re paying interest, you should know what the interest rates are. You should also know what comparable rates are for your type of loan. If you’re paying way too much, then it’s time to start looking at lowering them. The easiest one is credit cards. If you are paying a high rate, call and ask them to have it lowered. Many credit card companies will lower them so that you don’t leave.
- Even better, eliminate interest altogether – One thing that’s better than a lower interest rate is no interest rate. Look out there for balance transfer offer, and try to look for ones that will give you a 0% rate. You won’t get to keep the 0% rate forever, but if you find one that gives you 3-6 months, you can apply all of your payments (combined with the extra payments from the cost saving measures you took above) to pay a huge chunk (or maybe all) of the amount you owe during that time. You should find balance transfer offers and compare them to see which one fits best for you.
- Start planning for next year – Your primary goal should be to get out of any lingering effects from this past holiday season, and your planning now will help you do that. However, nearly just as important is making sure that your plan lets you avoid getting in the same situation next year. Make a budget for the holidays, and see where you can make some reductions? If you get your credit card balance knocked out in July, can you take the money you were paying and set it aside for next holiday season? If you spend with cash, can you set aside your loose change as a way to save some money throughout the year? These are just a few things that you can do to make sure that your plan addresses not just the short term, but also sets you up for long term success.
If the holidays aren’t over from a financial perspective, know that you’re not alone, and more importantly, know that your situation can be managed. Knowledge, hard work, and long term planning will help you clean up from the holidays, and set you up for long term success in the years to come.