There is nothing quite like the rosy glow of the holiday season, but once the presents are unwrapped, and the guests have gone home, it’s time to get your home back in order and back to routine. The same applies to getting your financial house in order.
And the first item of business? Attacking your holiday debt proactively.
“Don’t wait for your holiday credit card statements to arrive in the mail before you develop your payment plan. Being proactive in managing your debt will help you to get more organized and make your debt repayment plan more effective,” says Jeff Schwartz, Executive Director, Consolidated Credit Canada.
Take advantage of the time that you’ve got now before your bills are actually due to creating a plan. Last year was one of the most economically damaging in many. Prepare for your upcoming billing statement and double-check when your payment is due. Here is what you should do today to tackle your debt.
The benefits of planning ahead
Waiting a few weeks to deal with your credit card bills isn’t going to make them any smaller, but starting your payment plan ASAP will. ‘Giving yourself time to plan’ means that you can budget effectively enough to begin paying your bills.
Know your payment due date and review your statement closing balance before you even have to mail payments. Your credit card issuer must send you your statement balance denoting your statement closing date, and how much you credit card payment is for the month billing cycle.
It must also relay your interest charges and any other pertinent information regarding your credit card account.
One way to ramp up your bill repayment is to increase your cash flow, whether that means cutting back on other spending or finding cash in other places- like selling unwanted items. This could take time to do, so starting now means that you’ve got extra cash to pay down your credit cards before they are due.
Put your credit card away
Just like your stretchy pants may have gotten a workout over the holiday from eating indulgently, your credit card may have seen a little too much activity in the name of the season. Just because you over-indulged, though, doesn’t mean that all is lost. It’s all about stopping the excess and getting back on track.
Start by taking your credit cards out of your wallet. Commit to a cash diet to keep your debt load from growing more.
Tally Your Debts
To know what you are up against, you need to know exactly how much you owe. Hopefully, you’ve been able to keep all of your receipts from your holiday purchases. If not, determine what you owe by reviewing your account online. Add up exactly how much you owe.
What’s your budget?
You may already have a household budget, but you might need to retool it to address the extra holiday debt you’ve incurred. Once you’ve got an idea of how much you owe, you can modify your budget to match.
Pay Your Debt as Quickly as Possible
Plan to pay more than the minimum because you will do very little to erase the debt simply by making the minimum payment. Treat your credit card as an installment loan with a set payment, rather than open credit with a minimum payment based on your balance. Determine exactly how much you can afford to put down a month to cover the debt and use that as your “minimum payment.” The additional amount will reduce your balance and set a payment easier to budget for.
Start Planning for Next Year
“Want to avoid next year’s holiday debt hangover? Start planning today, even while you’re paying down your current debt load. Set a budget for next year and start putting a little money aside every month. When you get closer to the season, make an itemized gift list with a budget amount attached for each gift. To make your tracking even better (and to help you budget more accurately going forward), make a note of what you actually spent on each gift once your shopping was done,” says Schwartz.
That way, you can start a new holiday tradition- a debt-free New Year.