How to Cope with Holiday Debt

Time to deal with holiday debt

Now that the holidays are over, many Americans are mired in debt. Sure it was simple to use the cards for expenses, but not when the credit card bills arrive. The spokeswoman for the National Foundation of Credit Counseling, Gail Cunningham, 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. She also counsels her clients not to stretch out payments because of holiday spending, which negates the savings. Once the holidays are over, leave the credit card at home. If you can’t pay for something in cash on the spot, move on. 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 caution that budgeting isn’t always enjoyable. It can actually be hard to assess what’s coming out versus going out every month. In the end though, it’s the only way to get an accurate picture of where your money is going and what changes need to be made.

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 vital to note everything from a big ticket purchase, to a cup of coffee. You want as accurate a picture of your fiscal month 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. Review your tax withholding on your W-4, and it can show you if you’re deducting more than you should per 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 the key to getting rid of 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.