So you’ve received your credit card statement and you over-spent this year.
After the holidays, some of us experience the post-holiday shock. In January when the credit card bills arrive in the mail, this shock comes from the realization that you spent too much money eating out, buying gifts, and you really overdid it this year. Let me give you some tips to help alleviate your post-holiday credit shock.
- Reflect and Gather – You may want to get out a piece of paper for this tip or develop a spreadsheet on your computer.
- Start by making a list of how much you spent. This information will allow you to reflect on this year (did I overdo it?) and give you a better idea of your situation.
- As you pull together your credit card statements make a note of when your bills are due.
- Develop a Plan – Now you know how much you owe and when it is due. The next tip is to develop a plan to repay the debt.
- In an ideal situation, you want to pay the entire balance on your credit card bills. If you are not able to do so, and many people are not able to, you need to consider the due date, interest rates, and the number of bills you have.
- Utah State University Extension has a great tool called PowerPay. This tool allows you to put in variables such as the amount owed and interest rates, and gives you scenarios to pay off your debt.
- Another method used to pay off debt is the snowball method. With this method, you focus on paying off your lowest balanced debt first while making minimum payments on the others. Once you pay off the lowest debt, you take the money you were paying on that one and put it towards the next debt. The amount you are paying towards your debt gets larger and larger as you pay off the smaller debts.
- The other approach is the interest rate method. With this method, you are focusing on the highest interest rate debts. Here is a good article that compares the two methods.
- Monitor – You came up with a plan and now you need to monitor your plan.
- Are you staying on track?
- Are there changes in your financial situation such as changes in expenses or income?
- If there are changes, life happens, so don’t be discouraged. Go back and adjust your plan.
- As you monitor, think about developing a spending plan or budget. There are some great tools you can use in the Your Money Your Goals Toolkit by the CFPB.
- Revise and Prepare – Let’s also look ahead to the next holiday season.
- Establish some boundaries about how much you will spend.
- Make a list of names of the people you will buy gifts for and about how much you will spend on each person.
- This will give you a total amount of spending you can use to determine how much to set aside on a bi-weekly or monthly basis.
- For example, if I plan to spend $600 next year, I can break that down to setting aside $100 a month for six months. So if I start on July 1st putting aside $100, I will reach my $600 goal on December 1st.
Good luck and best wishes in the new year.