Best Tips to Recover from Holiday Spending
If you found yourself in debt due to holiday purchases, you’re not alone. According to LendingTree, 36% of Americans took on debt for holiday spending in 2021. What’s more, NerdWallet found that 29% of shoppers that charged holiday expenses in 2020 carried that debt through 2021. Yikes!
Regardless, if you’ve spent too much on the holidays, were already in too much debt, or have just depleted your savings during the season, you need a plan. What are the best solutions? We’ve got a few.
Tip #1: Take Serious Account of Your Situation
You need a monthly budget. This may seem obvious, but many people don’t have an accurate picture of their savings, their total monthly expenses, how much they owe on their credit cards, etc. Having an accurate picture of your financial situation is critical for everyone. Information is power, after all.
Building a monthly budget is crucial. It’s the best way to see where your money is going and identify saving leaks. Not only will you have a better understanding of where you are in terms of debt and available funds, but you’ll also be in a far better position to reduce debt and build your savings. Moreover, sticking to that budget makes your spending intentional. It can prevent many of the self-imposed financial hard spots people find themselves in during the holidays or anytime during the year.
Cut costs wherever you reasonably can. If you were already frugal, the pickings may be slim but almost surely not nonexistent.
Tip #2: Engage in Frugality
Once you’ve got a good idea of your current situation, it’s time to cut costs. You knew that this part was coming. We’re not going to give you clichéd advice like asking you to skip your morning coffee for the month. You should already know about these spending leaks and be eliminating such obvious non-necessities.
There may be even more significant savings to be had: Do you eat out often? Cooking can save you a fortune, whether you order in or go out to actual sit-down restaurants. We’re talking around 4–5 times the cost of preparing your food. Cutting way back or taking a break from dining out could save several hundred dollars a month, depending on how often you eat out and how much you spend when you do.
Cut costs wherever you reasonably can. If you were already frugal, the pickings may be slim but almost surely not nonexistent. If your lifestyle is luxurious, you’ll find it easy to identify opportunities to save.
Tip #3: Pay Down Debt to Free Up Cashflow
First, determine which method you want to use to pay down your debt — The Snowball Method or the Avalanche Method.
The debt snowball method reduces your debt, first starting with the smallest balance. In this method, you focus on making the largest payment possible toward the smallest debt while making your minimum payments on all your other debts. When your smallest balance debt is fully paid, you roll the money you were using to pay off this balance to the debt with the next lowest balance. You continue this until all your debts are paid in full.
The debt avalanche method first reduces your debt, starting with the highest interest rate. From this point, the steps are the same. You focus your attention and any extra payment on the highest rate debt while continuing to make your minimum payments on all your other debts. When your highest rate debt is fully paid, you roll the money you used for that debt payment to the next highest rate balance. You continue this until all your debts are paid in full.
The debt snowball and the debt avalanche method are effective strategies to get out of debt. Ask yourself: Which strategy will keep you motivated? And, how will I change my habits to avoid ending up in the same position again?
Try to get control of your finances, and you’ll find recovering from holiday spending to be a cinch!
Tip #4: Use Windfalls to Your Advantage
Many people receive a holiday bonus, and many people also get some tax return in one way or another. Too often, people spend these windfalls on frivolous things. If such circumstances apply to you, these are valuable opportunities to right your financial ship.
If you’re struggling to recover from holiday spending, use these kinds of windfalls to your advantage. Pay off any debts you have, or reduce them as much as possible. If debt isn’t an issue, increase your emergency savings. Your savings will make it easier to weather any unexpected costs in the future, like a surprise hospital visit or your car breaking down without warning.
Tip #5: Sell Unused Personal Possessions
Selling old and unused possessions is an easy way to earn some quick cash. Various websites, such as Craigslist, eBay, Facebook Marketplace, and OfferUp, offer a platform on which to do so. You can also check out your local consignment store.
You’re going to sell your possessions for (usually) far less than you paid for them. This goes for technology, furniture, household appliances, etc. Only collectibles and rare items increase in value over time. But these are non-essential items we’re talking about, so getting your financial life in order ought to provide more than enough incentive to part with them.
Just be sure to avoid common scams (often centered around fraudulent payment methods or activities or sending the product before receiving the verified funds). When selling items to strangers, selling locally, meeting in person in a safe, public space; and exchanging the goods for cash only is the safest way to proceed.
Tip #6: Save for Next Time Starting Now
Finally, allocating some money ahead of time for holiday spending is a good idea. Not only will you not have to deal with a lot of the stress and hassle ahead of time, but it will also make it much easier to afford anything extra that comes up, saving you the stress of repeating this cycle.
Frugality can help you recover from hefty spending, but how about creating a specific section of your savings for that purpose ahead of time? That’s what budgeting is all about. And it’s far more manageable and far more achievable the more time you give it.
Try to get control of your finances, and you’ll find recovering from holiday spending to be a cinch! Moreover, you’ll be developing habits that will lead to a lifetime of financial responsibility.
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