Sometimes holiday spending can get out of control. Last-minute expenses always seem to pop up that time of year. If it’s happened to you, making a plan to get your spending in check is crucial. Here are my tips for bouncing back from holiday debt.
Assess your financial situation
Before you do anything, it is important to understand your complete financial picture, including your monthly budget. Make a list of your debts, payment due dates, minimum payment amounts and interest rates.
Make a plan to tackle debt
Paying the minimum monthly payment is the worst thing you can do. Ideally you should pay off balances in one to two months. If you have debt on multiple cards, pay off the balance with the highest interest rate first. Setting up automated payments will also ensure you don’t let due dates slip by and incur any unnecessary late fees.
Don’t make it worse
It’s impossible to get out of debt while adding to it, so curbing any frivolous spending is critical. Post-holiday sales are tempting, but put yourself on a financial diet and try not to spend on any nonessential items until you catch up on your debt incurred during the holidays. In fact, put your credit cards out of reach so you’re not tempted to use them. You can also make simple lifestyle changes, such as canceling underused subscription services and limiting the number of times you eat out per week, to help get things back in order.
Avoid quick fixes
Even if your debt seems overwhelming and you’re looking for help, you may want to avoid companies that promise to help you settle your debt for only a small percentage of what you owe. Many debt-settlement companies charge an upfront fee before providing any services and some of the services are even illegal.
Monitor your credit
It’s important to see where you stand by reviewing your credit report. The report should include factors that are negatively affecting you score and areas you can focus on to improve your score. And, of course, it is important to review it so you can keep an eye out for fraud. You can also sign up for free credit monitoring at sites like CreditKarma that will alert you if there are changes to your score.
Before the end of the year we got a call from the person who does our taxes to let us know our tax bill was more than we were anticipating. In response, we’re going to tighten our belts and get back to budgeting. The New Year makes for the perfect time to reassess your financial goals!
Kat’s Money Corner is posted on KansasCity.com every Tuesday. Kat Hnatyshyn, when not blogging or caring for her little ones, is a manager with CommunityAmerica Credit Union. For more financial chatter, click http://twitter.com/savinmavens or visit http://communityamerica.com.