How to Recover from Holiday Over-Spending
These strategies will help you and your family claw your way out of debt
The holidays can involve a shopping frenzy that leaves your budget in the dust. If that was you and you're reeling from your generosity, all is not lost.
Here are five strategies to consider to give yourself the best chance of paying off those holiday purchases and paying down your debt while protecting your household budget.
1. Recognize that you need to take action. Personal finance expert Andrea Woroch suggests you take stock of all accounts that you've charged on and figure out what you owe and when. Be sure to make an on-time payment of at least the minimum amount due on each account. (Ideally, you would pay more than the minimum, but pay at least that.) The last thing you want is be slapped with fees and higher interest rates for missing a payment due date.
2. Turn gifts, gift cards and household items into cash. If you have gift cards you don't think you'll use, you can sell them online and get a percentage of the value in cash. It's better to get money in your hands than have a gift card that will sit in your drawer. Do the same thing for gifts you won't use and items around the house someone would be willing to pay for, like tools, furniture and old children's toys.
3. Chop your spending. Examine your monthly expenditures and trim back on non-essential groceries, clothing purchases, eating out and any extras you identify until you've paid off what you owe. Figure out if there are any bigger-ticket items you can do without or cut back on (like cable TV or your wireless or cell phone service) to see if you can free up more money each month to put toward your debt payments. If you don't already have a household budget, there are tools online that can help you make one. The Federal Trade Commission's consumer.gov website explains what a budget is, how to create one and how to use it each month.
4. Consolidate your debt. If you have balances on a bunch of credit cards, particularly if they're on higher-interest store credit cards, look for opportunities to transfer your balances to a single card with a lower interest rate. Many consumers can find offers for cards with zero-percent introductory rates. Be sure to take note of fees associated with balance transfers and do some quick math to be sure you'll end up ahead. It is a lot easier to keep track of one card rather than ten and, generally, interest rates on regular consumer credit cards will be less than those issued by stores.
5. Grab extra work when you can. Whether it's working overtime where you now work or coming up with an additional source of income, making more money always helps. Consider what skills you have that might be of value that you can use for a side job. If you like pets, for instance, consider pet sitting or dog walking. Or look for a part-time position after your normal work hours.