As the holidays wind down and schedules return to normal, it is common to take inventory of your finances. If strict budgets were not kept over the last two months, you may find that the incoming January bills are much larger than anticipated. After the shock and dismay over what you really spent passes, it is time to get down to the business of paying off the holiday debt so it doesn’t linger on your balance sheets for years to come.
When debt is left to linger it can lead to a financial crisis not far down the road. Companies spend millions in advertising each year to convince you that their products are not merely wants, but insatiable needs. When you buy into these messages you can be left with large amounts of debt that can take decades to pay off. This is especially true when only minimum balances are addressed each month. Now is not the time to access blame, but to tackle the problem at hand and focus on workable solutions.
The Following Are Five Full Proof Strategies to Eliminate Holiday Debt Quickly
Take an Accurate Assessment: The first step to any debt elimination strategy must begin with an evaluation of where you are. This could be accomplished by isolating holiday spending that took place November and December, or a more comprehensive approach, that includes a complete debt assessment. The goal is to determine where you are and then create a realistic strategy for debt elimination, it will enable you to pay debt off quickly and efficiently.
Whichever approach you choose, evaluate each bill as it arrives. Ensure there are no unauthorized charges, and then record the balance, interest rate, and minimum amount due for each applicable credit card. Addressing large amounts of credit card debt may feel overwhelming. However, the idea of paying for that cool sweater, or new smart television you just purchased for the next 10 years should motivate you to take a closer look at where you are financially.
Successful strategies must include a timeframe and a way to measure success. Ideally, this year’s purchases will be paid in full before the next holiday season rolls around. Paying it off sooner will free up funds for vacations and other costs that are sure to come up as the year progresses.
Total debt elimination typically extends beyond a one-year horizon. Stopping additional debt accumulation will start you off on the right foot for long term debt reduction goals.
Prioritize Debt Payments: Once there is a clear view at where you are with regard to credit card debt, it is time to determine what order they will be paid. Consider total balances and interest rates on each card. Then consider what motivations you need to stick with a plan.
Some find it easier to pay the smallest balance first, because it results in quicker success, which can be very motivating. Others focus on the highest interest rate. This results in the lowest amount paid because interest charges are minimized over the life of the debt. When 0% promotions are in place they can fall lower down the list, at least initially. For all promotions ensure you understand the fine print. Often the balance must be brought to zero before a specific deadline. If the deadline is missed interest accrues from the date of purchase, sacrificing all the benefits of the promotional rate.
For credit cards with revolving balances and an on time payment history, calling the company to request a rate reduction can be successful. Every percentage point in reduced interest results in more of your payment going towards the principle instead of interest. This can lead to large financial savings and faster debt reduction.
Create a Plan and Work the Plan: As simple as it sounds, putting a plan on paper and sticking with it will ultimately lead to success. There is no right or wrong way to eliminate debt. Any plan you choose, if you stick with it, will lead to success, as long as you’re not adding more debt along the way.
Consider other options when you are carrying large amounts of debt. There may be solutions you have not considered, which can lead to paying less and eliminating debt faster. These might include debt consolidation or debt negotiation depending on your circumstances. These solutions could result in immediate relief by lowering monthly payments, as well as a long-term debt elimination plan that can reduce the amount you owe.
Address Spending: Once a plan has been put in place that is realistic, measurable, and within a specific timeframe, to is time to find additional money to make the plan work. Sometimes tightening the budget is enough to get your finances on track. Other times is means stricter budgeting and eliminating most discretionary spending. It may be possible to make small changes that will “find” enough money to pay down your holiday debt. Other times more drastic measures may be required to get your budget in line.
Evaluate Holiday Spending Going Forward: Eliminating this year’s debt is the first step. Then it is time to understand your spending patterns and prevent future debt accumulation in the coming years. Was debt accumulation the result on budgeting shortfalls, too much impulse buying, or missed costs that you didn’t account for. How much did you spend in total and should that be expected in future years. In January, time is on your side, and you can begin to set aside a little each pay period to provide an adequate budget.
Credit card charges can feel like a temporary solution to a tight financial budget, or higher than ordinary expenses like holiday spending. The challenge is that when this debt gets carried over from year to year, you could find yourself in a financial crisis without recognizing the warning signs. If you have made late payments in the last 12 months, are only able to manage minimum payments, or find your debt increasing each month, you could be facing an impending financial crisis on the horizon.
If you are burdened with high amounts of credit card debt and are struggling to make your payments, or you’re just not seeing your balances go down, call Timberline Financial today for a free financial analysis.
Our team of highly skilled professionals will evaluate your current situation to see if you may qualify for one of our debt relief programs. You don’t have to struggle with high-interest credit card debt any longer.