Picture this: December rolls around and credit cards emerge from your wallet. In a binge of holiday spending, you splurge on expensive gifts for your kids, grandparents, aunts, and uncles. You figure you’ll pay the charges off in January. But when January arrives, other expenses take priority. Credit card balances, instead of being paid off, accumulate. Does this cycle sound familiar? Studies estimate that a third of Americans acquire new debt during the holidays, and about 7% are still paying off bills from last year’s seasonal spree.
If you’re wondering how to tackle that big January invoice and make next year more manageable, consider these six tips.
- Cut back on January and February spending. Eat out less. Skip the morning stop at the coffee shop. Cancel unused subscriptions and memberships. Pack a lunch. Then direct that freed-up cash toward outstanding credit card balances.
- Sell unused or unwanted items. Scour the attic for stuff you haven’t used in years. Hold a garage sale or post saleable items on eBay or Craigslist. Add unwanted gifts or gift cards to the “for sale” listings.
- Stop borrowing. It’s tough to trim credit card debt when you’re adding to the balance. So when you head to the shopping mall, leave your credit cards behind. Don’t fall for the “easy financing” appeals of furniture shops and car dealerships. Resist the urge to reach for the plastic.
- Organize your debt. If you have several outstanding credit card balances, make two lists. Organize one by outstanding balances, smallest to largest. Organize the other by interest rate, highest to lowest. Paying off even one low-balance credit card can be motivating. Alternatively, you might want to tackle high-interest debt first because it makes the most sense from a mathematical standpoint. Either way, the goal is the same: whittle away debt until it disappears using the method that works best for you.
- Start saving for next year. Set aside a small amount each week. Doing this by automatic bank transfers is a relatively painless way to accumulate funds for next December.
- Reconsider holiday priorities. Take a hard look at your standard holiday processes. Call a family meeting. Consider downsizing holiday gift exchanges by putting cost restrictions on gifts or drawing names from a hat. You may find that friends and family appreciate your thoughtfulness, especially when faced with their own January bills.
Contact us for more debt management tips. We’re here to help you make the most of your money.