How to cope with the over-budget holiday debts?
The holiday season is a time when many Americans spend big on dearest friends, relatives, and themselves. During the festive fuss and buzz, it’s easy to fall into the urge to spend and buy more than you can afford. However, if you don’t want overspending to set you back financially in the new year, here’s how to quickly pay off your holiday debts and start 2023 on the right financial footing.
Create a debt payoff plan to tackle your debt faster
To pay off your holiday debt quickly, you need to know what you’re dealing with. Open your credit card bills or check your statements, then add up all of your balances to get a clear picture of how much holiday debt you have. Once you know the scope of your debt, you can set some reachable goals.
First, make a detailed budget and commit to tracking everything you spend, so you can see exactly how much you need to pay for basic expenses.
Then think about automatically scheduled bill payments and direct deposits from your employer into a savings account to stay on top of your financial goals.
Any funds you can carve out of your budget should be put toward your debt. If you have credit card debt, pay at least the minimum payment on all your balances. Making at least the minimum payment on your credit cards ensures that you do not get stuck with late fees, penalty APRs or derogatory marks on your credit reports. However, it’s a good idea to make more than the minimum payment on your credit cards whenever possible.
Always pay your credit card bills on time
Getting a credit card statement after spending spree on holiday gifts can be discouraging. However, the last thing you should do is to ignore these bills. Payment history is the biggest factor that influences a credit score and accounting for 35% of your score.
Having a good history of paying your bills on time and keeping your overall debt low are some of the key drivers toward a good credit score.
Get an interest-free credit card for further purchases
If you’re still doing your shopping and want to avoid debt, you may want to consider using a 0% APR credit card that can help you get the cost of the debt under control while you focus on paying it off. These cards let you avoid interest payments on purchases, balance transfers or both for a set period of time. You can find introductory offers for 15 months or more without paying any interest on top.
Keep in mind that once the interest-free introductory period ends, the regular interest rate is applied to new purchases and any remaining balance. So, you need to make sure that you use the card properly. You must pay off at least the minimum each month (or more, if possible), and have a plan to pay the debt off in full by the end of the promotional period.
Transfer your debt to a balance transfer card
While giving gifts during the holiday season is a common way to show those around you that you care about them, it can cause that you run on a tight budget when everything was said and done. If you find your debt unmanageable, applying for a balance transfer credit card can be a great way to avoid carrying a balance and paying interest on your debt.
The main purpose of a balance transfer is to consolidate existing debts and pay them off in one single payment. Balance transfer cards generally have lower interest rates than other types of cards, so a balance transfer can reduce your monthly payments and ease your post-holiday tight financial bottom line.
If you don’t want to open another credit card, taking out a personal loan is another option for consolidating credit card debt.
Set a budget to avoid overspending and impulse buys
Swiping a credit card may not feel like spending real money in the moment, but you always have to pay off your balance later and sometimes with interest. Tracking your spending is a key to successful budgeting as it allows you to know your limits and to count every dollar you spend.
It’s important to set a budget that fits your lifestyle while meeting your financial goals. This process may take some work, but it will help you avoid running the risk of getting yourself into credit card debt, negatively impacting your credit score or not being able to contribute to your major financial goals.
Credit cards are good because they allow you to make purchases and pay for them later. However, this flexibility makes them dangerous for impulse buyers. In the moment, the purchase may feel great. But over time, impulse buying could mean bad news for your wallet.
Sticking to a budget not only helps you pay off debts faster and build a robust savings but can also help you stop overspending on impulse buys.
Another way for saving money that may seem surprising is to give yourself an opportunity to spend a little on fan. Your budget should also have a room for discretionary expenses. Without it, your budget may seem too restrictive, and it will be difficult to stick to it in the long run.
If you’re feeling a little dizzy from the holiday rush, don’t worry, you’re not alone. Many people feel overwhelmed financially at this time of year. Paying off debt isn’t easy. But if you stick to that goal, you’ll find that you can make significant progress in a short time.
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