Guest Author - Reshma Vyas
If you racked up big credit card bills by binging on holiday gifts and are now just waking up to the sobering reality of all that debt, take heart! You are far from alone! Millions of individuals struggle with this stressful problem year after year and if the past is certainly any indicator, many will still be carrying holiday credit card debt well into summer and possibly, early fall. Last year's holiday credit card debt is not something you want take with you when you go holiday shopping this year. Getting rid of that debt sooner than later should be your first financial New Year's resolution. Let's take a look at how can we use a focused, proactive approach to resolve holiday credit card debt:
The first step:
Check your sales receipts and credit card bills to make sure they are accurate. Look for any possible errors.
The second step:
List all your credit card debts including the interest owed. Note the balances which have the highest APR as you will want to pay off those first.
The third step:
Review the amount of your total debt. This can be a emotionally painful revelation because many people are simply unaware of how much they actually spend during the holiday season. Getting insight into your holiday spending patterns is a vital step towards the resolution of your holiday credit card debt problem.
Finding The Money:
Now that you know you much you owe and the interest rate on those debts, the real work begins; creating a solid, proactive financial plan to get rid of holiday credit card debt as quickly as possible. This means we have to do intense financial multi-tasking; stretch our current income and savings as much as possible. And, if that isn't enough, find ways to generate extra income.
Here are a few tips that may be helpful as you develop a customized financial plan for paying off holiday credit card debt:
1. Stop using your credit cards until all your holiday credit card debt is paid off. Do not take your credit cards with you when you go shopping. If you don't have them, you will not be tempted to use them. Pay cash for everything.
2. Develop an extra lean budget. Think of it as a temporary crash-diet for money management. Cut your expenses by a third or more, if possible. We can all save more money, if we try. Get rid of cable television and the internet. You can use the internet at your local library. Cut back on usage of your cell phone. Believe it or not, but there was a good quality of life before cell phones, internet and cable television. Focus on entertaining at home by organizing a potluck dinner with friends once a week. Discontinue your gym membership and take long, brisk outdoor walks instead; cold weather is psychologically and physically invigorating. You can also exercise at home with a weight band and freeform weights. If you have an exercise machine at home, use it! One advantage of scaling down your living expenses is that, after a few weeks of initial adjustment, you may actually end up enjoying the personal freedom that comes from having more time for yourself, not to mention the extra savings.
3. Take a second part-time job, preferably on weekends. Working 5-8 hours on a Saturday or Sunday is not that cumbersome. You will still be left with a sizeable chunk of the weekend that is still "your time." Find a part-time job in a field you like. You might want to apply for a part-time sales position which also offers commission and performance bonuses.
4. Always volunteer to work extra hours. With layoffs and downsizing of staff, many employees have the opportunity to work overtime. Even coming in an hour earlier before your shift or staying an extra hour at work can help you reach your goal of paying off your holiday credit card bills that much sooner.
5. Use all bonus or commission checks, overtime money and any left-over savings to pay off your holiday credit card debt. If you have any additional savings, excluding your emergency fund and retirement accounts, the most practical course of action may be to put it towards paying off your holiday credit card debt. If you can become debt-free by early spring, you will still have the rest of the year to focus your attention on increasing your personal savings. You may decide to continue working at your second, part-time job until you have reached your savings goal.
6. Rank your debts in terms of priority and create a responsible payment plan. Focus on paying off the bills with highest rate of interest first. You can still continue make minimum payments on the balances with the lowest interest rate. But minimum payments can keep you in debt for a long time. And, consider all the high interest that you are paying. To speed up the process, you can double or triple the minimum payment and send that payment amount to your credit card company each month. Follow through the process until you have paid of all your debts. Keep accurate records of your payments and amounts owed so you can refer to them. While transferring balances may be a feasible option in some cases, it is not a panacea. It is essential to read the fine print and be aware of the terms, conditions and any applicable fees. Pay all your bills on time. A missed payment can damage your credit score.
Holiday credit card debt can seem like a daunting, oversized burden but it doesn't have to be. Getting started is the hard part. It is all too easy to ignore the problem and hope that it resolves by itself. But it can't and after awhile, it begins to weigh you down. Once you take proactive steps to tackle your holiday credit debt, you will be able amazed at how quickly you can pay it off. As you pare down your holiday credit card debt, you should take solace and encouragement in your progress and look forward going into new holiday shopping season debt-free!
For informational purposes and not intended as advice.