January 18, 2012

Overspent This Holiday Season? – How to Get Your Finances Back on Track

Spending during the holiday season can really set you back financially. It’s all well and good to read advice on how to avoid holiday debt; but now that you’re in it, what can you do? How can you get your finances back on track? Here are some tips.

Long-Term Changes

Twelve months are not as long as they seem. It may take that long or longer to pay off your holiday debts, so it’s a good idea to plan to make changes over the long term. In other words, you can’t expect to spend yourself into debt every year, or you’ll end up digging a hole you can’t get out of.

Take a Look – a Real Look – at Your Finances

It can be so hard to admit you messed up and got yourself into debt. But if you don’t, it isn’t going to go away, and everyone will expect you to keep spending like you always have. It’s best to face the facts.

First, sit down with all your holiday bills. Write down the amounts and interest rate of each one. Then, look at the one with the highest interest rate. That’s the one you want to pay down first. Then, look at the others. Determine how long it will take you to pay them all off and how much per month you’ll be putting toward bills, and set yourself to the task.

To keep these numbers ever before you, keep a running list, hand-written or on your computer, that you can update each time you make payments. This can help you keep actual numbers in mind, and may help boost your mood as you watch the numbers decrease. For the numbers to really go down, you’ll need to pay more than the minimum payment – more on that below.

More Than the Minimum

If you only pay the minimum balance, it will take a long time to pay off and you will end up paying a lot more in the end. As you put your payment plans in order, count on paying as much over the minimum payment as you can.

Fiscal Discipline

If you are serious about getting your finances back on track, then you need to exercise some significant discipline with your finances in the upcoming year. In fact, you may need to rethink how you view money.

Think of all your income – windfalls, gifts, tax returns, bonuses at work, regular income, etc. – as a means to get you out of debt. When you see the numbers on that check or those bills, your debt numbers should immediately pop into mind (and you are keeping track of those numbers, right?). Only after you’ve spent a percentage of your income on your debts can you spend on unnecessary things.

Inform Friends and Family

It’s probably a good idea to let your friends and family know you are making these changes. Your family will certainly need to know, because your finances directly affect them all year round. Your friends should be in the know, too, although not necessarily to the same degree as your family. Otherwise, everyone will expect you to keep spending the same amount on them each holiday season.

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Alexis Rodrigo