It is that time of year again where just about everyone’s focus turns to the holiday season. And even though there has not been much to celebrate in 2020, the holiday season always seems to lift the spirit and the charge cards for most of us. The immediate issue with using credit cards to purchase your holiday gifts is that the bills roll in later. And with the hustle and bustle of the season, it is really easy for many people to lose track of their spending. Even worse, most people have come to accept the season’s increased level of spending and are resigned to the fact that they will be spending the first part of the new year paying off or down those debts.
But does it need to be this way? I don’t think so. I think with a little for sight and thought and a good dose of discipline, we can minimize the financial snowstorm the holiday spending season brings. How can we accomplish this? Simple, by creating and sticking to a holiday season budget.
Creating a budget
Now we have reached the meat and potatoes of our subject matter, creating a household budget. A household budget and not just s budget for holiday spending? Yes! Granted we are discussing how to keep holiday spending under control; but we must accept that holiday spending is directly tied into our larger household budget. Where do you think the money to pay off the bills for all those presents is coming from? Your household budget! Now I know what you are thinking that this seems overwhelming and daunting. And to be honest, yes it can be. But you are not in this alone; there are ways to get help. I mean, that is why you are reading this blog right now, to get help, correct? Rest assured that I wrote this blog to do just that, help. So, before I go onto to a little fuller explanation about creating a budget; feel free to download the one that I created. There are two versions, one you print out and another that is an excel worksheet. Use one or both! Now I will quickly go over the steps to creating your household budget.
Step 1: Collect all your outstanding bills and sources of income statements. It is vital that you account for every penny coming in and going out!
Step 2: Using our worksheets (or you own ledger system) make two columns (one for income and one for debts) and list the type and amount of each monthly income and debt source.
Step 3: Total each column and compare them. Are you in black (have extra money left over each month) or in the red (spending more than you are making)?
Step 4: Make your plan. If you have extra money each month, how much will you set aside to pay off your holiday credit card spending? Do/can you move around or cut out current household expenses to add to your holiday spending? If you are in the red, then in all honest, you should not be spending anything on holiday gifts. But if you feel like you must, then pay in cash! Never use credit cards when you have more money going out than coming in. If you do, you are just digging yourself into a deeper financial hole.
Step 5: Once you create your plan; stick to it at all costs! Feel free to review it and make changes but do not abandon it.
Paying off the bills
Once the holidays are over, the bills will start rolling in. A new year and new debt; something to look forward too. Well, maybe; after all, you have prepared for this situation. You had setup and stuck to a budget. And now you just need to implement your repayment strategy. There are several ways to repay your credit card debt. Here is a list of four ways to repay that holiday credit card debt.
- Target on debt at a time. You want to be sure to pay the minimum amount on each of your credit cards. But choose one (the one with the highest interest rate or the smallest balance) and pay extra on that debt. You want to try and clear that debt as fast as possible. Once you do, repeat the process.
- Pay more than the minimum. You if your budget affords allows it, pay more than the minimum payment required. This works well if you only have one or two credit cards.
- Consolidate cards. If the numbers work out, try moving the debt from a couple of your cards to a new low interest rate card. This is only a good idea if you plan on making payments. Otherwise, you are doing nothing more than kicking the debt can down the road.
- Re-budget! Take a fresh look at your household budget and see if you can move things around or cut out. Then put that freed up money into paying down your debt.
Well there you have it. Simple right? Just create a budget and then pay off the bills when they start arriving. Trust me, it is certainly easier said than done. But you can do it! You just need to stick to and trust the process. It will take dedication and will power, so if you feel weak or like you are faltering, look to you your support system. Get your self a budget buddy! Someone that you feel confident that they can help you stay the course. Heck help each other out; be each other’s budget buddy! The bottom line is that with all the craziness in the world and the severe decrease in delayed gratification, we all need a little help with financial responsibility.
It is so easy to charge things and not worry about the consequences. You know what they say, out of sight, out of mind. But debt builds up fast and with the high interest rates, you could very well be paying off that $5 cup of coffee for well over a year! It may be a good cup of coffee but not at 19% to 21% interest! It is high time we start accepting responsibility for our decisions and actions, once again. And what better place to start than with our personal finance? Don’t forget to grad our Debt Elimination Blueprint to help you on your way.