The holiday season often leaves us facing the aftermath of festive overspending. Here, we provide you with nine steps to guide you through any financial missteps made during the holiday shopping season.
Freeze Your Credit Cards
The first order of business is to halt your spending. Put those credit cards away—out of sight, out of mind.
Alternatively, if you want to ensure you won’t use them impulsively, consider freezing them in a block of ice. This way, if the shopping urge strikes, it will take time to thaw them out, giving you a chance to reconsider.
Calculate the Damage
When faced with the damage to your budget, don’t bury your head in the sand. Confront it head-on.
Summarize every receipt and credit card statement to determine the extent of your spending. While seeing the balance may be painful, it’s a necessary step.
When you see the figure on paper, it helps you understand the situation and identify areas where you might need to cut back.
Review Your Budget
Once you know the amount you need to repay, you also need to review (or create) your monthly budget. This includes incorporating new payments to the credit card companies into your monthly expenses.
Ensure your budget is balanced, meaning your monthly expenses don’t exceed your income.
Create a Repayment Plan
Next, devise an exit strategy—a plan to repay those credit card bills. Take each statement, listing information such as balance and interest rate.
While you might be tempted to pay off the highest balance first (a common debt repayment strategy), I recommend starting with the highest interest rate, especially for recently incurred debts.
By swiftly settling the bills, you’re minimizing the total interest paid to the credit card companies. There’s no need to pay more interest than necessary!
Once the first credit card is paid off, transfer the monthly payment amount to the repayment of the next card. Repeat this process until they’re all cleared.
Not only will you pay them off quickly, but you’ll also minimize the total interest paid!
Cut Back on Expenses
When you have bills to settle, it means you need to scrutinize your budget and find areas where you can cut back.
This might involve trimming cable bills or cutting out dining expenses. You might need to cancel that gym membership or explore more budget-friendly date options.
Being willing to make short-term sacrifices for long-term gains is necessary because the sooner you clear those bills, the better.
If you’re fortunate enough to receive a holiday bonus, don’t spend it recklessly. Use it to offset your holiday bills.
If you didn’t get a bonus, use any Christmas gift money you received to cover your bills! Look ahead to see if there will be other sources of income, such as birthday gifts or tax refunds, and allocate them to cover your holiday expenses.
Consider Part-Time Work
If you need to tackle bills head-on, part-time work might be the solution—even if it’s temporary. Look around your home for items you can sell. If you’re a teacher, consider offering tutoring services.
Every penny can go towards settling your holiday expenses.
You don’t want to find yourself in the same predicament next year. It’s not a fun cycle to repeat.
Holidays happen at the same time every year. It’s not an unexpected or unplanned expense. You need to prepare for it.
Review your total spending from this year and divide it by 12. Focus on saving that amount each month, and by the end of the year, you’ll be able to pay for next year’s festivities in cash, without relying on credit cards.
Use the Spare Change Challenge for Savings
To save money for holiday shopping, a simple trick is to switch to a cash budget. Then, save any spare change or leftover money after each pay cycle.
For instance, if your grocery budget is $300 and you only spent $270, don’t use that extra $30—put it towards your holiday savings!
The same principle applies to spare change. If the total is $7.49, hand over $8 and toss the $0.51 into your savings jar.
Saving doesn’t have to be difficult—simple tricks can help you build savings quickly!
Spending too much during the holiday season is easy, but with some savvy strategies, you can get your budget back on track.