SAN DIEGO — Christmas is over which for many people means one thing. Debt. However, it doesn’t have to be crippling. Budget expert, Andrea Woroch, breaks down what exactly you need to do to knock out that holiday debt that you accrued.
5 Steps to Cure Your Holiday Debt Hangover
It’s easy to get wrapped up in the holiday gift giving spirit, but this could also result in overindulgent spending. If looking at the balance of your credit card statement leads to one or more of these symptoms, you're likely suffering from a holiday debt hangover.
Here are several simple tips to help you cure your holiday debt hangover and get back on your financial feet.
Face It
It's easy to ignore your credit card and debt and pretend they don't exist. However, the longer you avoid your problems, the worse your financial situation will become. Begin dealing with your debt by organizing your financial accounts and statements to determine how much money you actually accumulated on your credit and store cards over the holidays. Note the balance and interest rates for each card and set up the minimum payments now to pay on time and avoid potential late fees.
Moderate Consumption
Limit buying to essentials -- food, bills, gas, etc. -- and avoid discretionary spending until your credit card balances are paid off. You likely received plenty of new things during the holiday season, so these should keep you well occupied and satisfied in the interim of paying down your debt. Identify your spending triggers and avoid them at all costs (i.e. don't go to the mall if you can't control yourself from buying new clothes!). If you're in need of something to distract you from spending money, focus on a New Year's resolution like working out or reading and learning something new. You can access free books at your local library!
Plan Your Recovery
Paying down debt takes time and without a plan, you can get lost and lose focus easily. A carefully crafted repayment plan will help you overcome obstacles. Set realistic goals and include the various steps you will need to take along the way to be successful and pay down your debt faster.
Consider the snowball vs debt avalanche method to figure out which one works best for you. You can use the Debt Free app to track your debt repayment goals for help staying motivated.
Think Long Term Recovery
When you’re in debt, the last thing you may be worried about is improving your credit health. But a healthy credit score is essential to a quality life and is necessary if you want to rent/buy a home or car or start a business. Plus, can help you get a loan with better terms and interest rates. This is a good time to consider a credit-building loan using an option like Self.
Treat the Toxins
Toxic spending behavior is one of the biggest culprits to a holiday debt hangover, and identifying these toxins is the first step toward recovery. Did you fail to budget? Did you binge shop near the end of the season? Did you skip money-saving strategies in favor of convenience? Understanding where you went wrong is the first step to righting the path ahead, so make a note of the missteps and outline ways to correct them.