How to Cope with Holiday Debt

Time to deal with holiday debt

Photo from Picasa

Photo from Picasa

Now that the holidays are over, many Americans are mired in debt. Sure it was easy to pull out credit cards for expenses, but now is when the credit card bills are coming in. Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, 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 stated, “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 charges seem to be more easily handled with plastic, they add up quickly. Cunningham also instructs her clients that stretching out debt payments as a result of a holiday spending spree, only negates savings. Once the holidays are over, leave the credit card at home. If you can’t afford to pay for an item with cash then leave it at the store. 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 shows that people who pay with cash end up spending about 20% less than those 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 warn that budgeting isn’t always fun. In fact, it can be a difficult task to honestly assess what comes in versus what goes out on a monthly basis. 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 get started with a budget is to start tracking every expense for one 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 important to note everything from a big-ticket item’s purchase to a cup of coffee. You want as accurate a picture of your fiscal month as possible. That way you can make the necessary changes to realistically reach your financial goals.

Check out the paperwork

Finally, it’s important to take time to look at paperwork that may reveal money drains. Reviewing your tax withholding on your W-4 form can show you whether or not you are deducting more than you should every month. Reading credit card statements can show you if there are additional charges you were not 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 for many Americans and a lot of stress comes along with it. Addressing debt early on is key to overcoming 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.

Other recent posts by bryanh