It’s easy to get swept away in the moment during the holiday season. In fact, that’s the whole idea. While most of this leads to nothing more than good fun, there is one aspect of the holidays that many of us fall victim to – overstretching our budgets.
It is common for people to spend more money during the holiday season than they would in a typical month, which leaves them in a financial hole come January. Fortunately, there are some easy ways to right the ship and get set up for a financially productive new year.
Assess the Damage
You can’t fix a problem if you don’t know what the problem is. As frightening as it may be to look at your credit card bill after your holiday shopping is complete, the consequences of ignoring the problem are far scarier.
Once the holidays are over, it’s time to assess the damage. Compile all of your credit card statements and cash receipts and add them up to see what your total bills will be.
Come Up With a Repayment Plan
Once you know the amount you owe, you can formulate a plan to pay it off. Every individual’s financial situation is different, thus his or her repayment plans will be too. However, there are some general guidelines you should consider.
You likely put many of your holiday purchases on one or more credit cards, meaning your next monthly bills will be higher than usual. If you can’t afford to pay your full balance on all of them, focus on those with the highest interest rates. These debts are the ones that will cost you more the longer it takes to pay back. Pay more than the minimum payment and always pay on time in order to avoid any late fees.
If Possible, Return Your Purchases
We can all get caught up in the moment when it comes to spending during the holiday season. Lured in by big sales and great deals, we often buy ourselves things we really don’t need. If this is the case, you can recover some money by deciding to return items. Stores have different return policies so make sure to check early, as some returns may not be accepted after a certain time period. Even if you can’t get money back, you may be able to receive store credit, which you can use down the line on an item you need.
Use Your Bonus Money
If you receive a year-end bonus, use it wisely. Sure, we would all like to be able to use this influx of income on something special. But lump sums of money can go a long way toward meeting your financial goals, whether that be reducing your debt, increasing your savings or boosting your monthly income to spend on essentials.
Stop Unnecessary Spending
This may sound obvious – and it’s a habit you should practice throughout the year – but you’ll really want to hunker down and stick to a strict budget following a time of high spending.
The simplest way to start is by formulating a budget. Start by writing down how much money you bring home. Then subtract how much you spend on necessities like housing, car payments and food. The sum of money left over can all go toward getting you back on a sound financial path if, for example, it’s used to increase your savings or pay off your credit card. Therefore, you’ll want to be very picky about how you spend your disposable income. Even small savings, like bringing your own lunch instead of eating out, can add up to a significant total at the end of the month.
Focus on the Big Picture
One bad financial month is not going to throw your finances into a tailspin or destroy your long-term goals. What will do that is allowing poor spending habits to become the norm.
Once the holiday madness has passed, take a step back, review your situation and get back to making smart financial decisions for both the short and long term.
Learn about all the ways AAA and Discover can help you handle all of your financial needs.