Once the holiday season is over the niggling worries that perhaps you overspent on the festivities can become reality when the credit card bills start to arrive. Unless the holidays were budgeted for in advance there is a good chance that money was spent before it was earned. Suddenly, not only do the usual bills need to be met, but there is the additional burden of paying back whatever kind of credit you succumbed to, be it credit cards, doorstep lending, loans or overdrafts.
Unless post-holiday debt is tackled aggressively you may find yourself still mired down in it until the next holidays. An excellent strategy is to not only deal with the accumulated debt, but to budget in advance for the next holidays so the debt situation does not become an annual occurrence. Compile a list from your receipts and credit card statements and total up the full amount you spent on the holidays. Include all holiday related expenses such as gifts, food, travel costs, decorations and anything else you went to town on.
This figure will enable you to consider if the money was well spent or wasted, as well as allowing you to plan in advance for next year. Remember to include the interest charges which will increase your debt, as this is a figure you can budget to negate next time. The most common form of post holiday debt is credit card debt. This should now be treated as a priority expense, alongside other necessary bills such as utility payments, rent or mortgage. Prioritise payments towards the debt above non essential costs such as entertainment and treats in your budget.
Your first step should be to either transfer all your debt onto a current credit card with the lowest interest rate, or opt for a low APR balance transfer card. If you have excellent credit 0% offers are available. These allow you to repay the debt with the only additional cost of the balance transfer fee, usually around 4%. If you do opt for a balance transfer then calculate if the saving on interest payments makes the fee worth while.
Your aim should be to clear down the credit card balances as quickly as possible. If you haven’t been able to utilize a 0% balance transfer then clearing the debt quickly reduces the cost of compounded interest which will be applied to the outstanding balance. When a monthly figure towards debt reduction is established arrange to pay it by automated payment so it leaves your current account before you are tempted to use if for something else. Whilst you pay the debt down try to restrain yourself from spending on plastic as any additional spending will simply increase the outstanding debt.
Cut out unnecessary expenses and consider areas where you spend needlessly. This is an excellent time to examine insurance policies and banking expenses to take stock and determine how premiums can be cut and if any unnecessary amounts are wasted on banking costs such as cash advance withdrawals or fees which can be eliminated.
Once you have an estimated time period in which the debt can be cleared then divide the amount you spent over the holidays by the number of months left after the debt is clear. This will give you a monthly figure to put aside towards the next holiday season, and instead of paying back debt to the credit card issuer each month, use the savings to put aside for the next holiday spending spree.
If this strategy is managed well then there will be need to go into debt for the next holiday. The following year you will be able to reduce the amount put away each month towards the holidays by dividing it over a longer period. Instead of paying interest on your holiday debt you will begin to accumulate interest payments which will increase the holiday budget.
Whilst it may appear as a dreary chore to work out an annual budget after the holidays and concentrate on debt reduction, it could well leave you debt free and prepared in advance for the next holiday. Using these strategies for post-holiday debt reduction could well put an end to the annual debt scenario.