Budget Busters: Holiday Recovery
You’ve been dreading it. You know; your January credit card bills. Unfortunately, it probably is every bit as bad as you think it will be. There’s a reason that lots more people seek credit counseling services in January and February. That reason is holiday overspending. But you can make it better next year, by working to pay off the debt you accumulated and building savings.
You can start the process by gathering all your credit card bills. Which one has the highest balance? Which one has the highest interest rate? Generally, your best bet is to take the card with the lowest balance, and work to pay it off as soon as possible. Then, once it’s paid off, you can roll that payment into the next card. This way, you see progress more quickly. You will feel motivated to keep going as you start making fewer payments each month. The trick is to avoid running up new debt on the empty cards. So once you’ve paid them off, take them out of your wallet or purse and only use them if you absolutely must.
Too many people rely on credit cards instead of savings. Some financial experts say that you should focus on paying off high-interest debt before you work on building a large savings account. They are right, but it’s not an all-or-nothing deal. While you are reducing your credit card debt, start putting small amounts of money into savings. It makes sense to save at least a small amount that you can use to replace broken appliances or fix cars when necessary. But keep a short-term holiday savings account separate from your emergency fund. If you put only $50 from each bimonthly paycheck into an individual account this year, you’ll have $900 by the time you got to the end of September. Then you could use that money for your holiday gifts, instead of racking up more debt.
Holiday overspending is a huge problem for a lot of people. By paying down your debts and creating savings, it won’t be your problem anymore.