Fixing Your Finances After Another Expensive Holiday Season
It’s easy to forget you have a budget when you get carried away by the holidays. But once the festivities die down, all your spending catches up to your finances.
If you blew past your budget and put a lot of the celebrations on credit, you wouldn’t be alone. About one-third of US shoppers go into debt each year. Many of these shoppers take a full year to pay off their credit cards, which causes them to pay even more in interest.
You’ve fallen into the holiday credit card trap — so what? Don’t dwell on last year’s mistakes. Let’s focus on what you can do to get out of it soon.
Your 3 Goals, Should You Accept Them
Dealing with your holiday shopping issues boils down to three big tasks:
- Paying down your debt, so that you have your cards back as a safety net.
- Creating a budget to avoid over dipping into credit in the future.
- Setting aside an emergency fund, so you have more than one way to deal with expenses.
What if an Unexpected Expense Arrives Before You Achieve Goal #1?
Life unfolds the way it will, regardless of your plans. You can slam your door on your thumb and require urgent medical attention, resulting in a big expense you weren’t expecting. Any countless and unpredictable emergencies like this can happen while you’re trying to deal with credit card debt.
If you usually reach for your credit cards in an emergency, you can’t rely on them to cover urgent expenses. But you can look into personal loans online as a safety net — just make sure you’ve found a legitimate lender.
When you’re looking at an online loan, what makes it legit? First and foremost, you need to find transparent terms and conditions. They spell out the important details of your loan that you need to know, like cost and due dates. A license to lend in your state is also a huge step in the right direction.
Accessibility is another green flag in an online lending option. Plenty of people encounter physical and cognitive barriers that can make navigating an online loan platform difficult. Built-in accessibility widgets support these borrowers, making it easier to access critical financial information and apply for loans online.
Goal #1: Paying Off Credit
Paying off debt is one of the most daunting things to do — particularly if your debt is spread out across multiple accounts — but it gets easier when you have a plan. Follow the snowball method, a debt payment style proven by research to help you stick with your goal.
How do you throw a snowball at debt? Put all the extra money you scrounge up into the smallest account while also covering the minimum payments on everything else. Once you pay off this account, roll this cash into the next smallest bill.
Goal #2: Making a Budget
Tracking your expenses can help you become more aware of your spending habits. You can eliminate the ones that interfere with the other goals on this list.
A budget can also help you prepare for big expenses and events. It’s never too early to start tucking away some money for the holidays.
Goal #3: Build an Emergency Fund
While budgeting, make sure you save some money each month in an emergency fund. Eventually, you’ll want to be able to cover three to six months of living expenses with this fund. Once it gets this big, you won’t have to rely on online loans or credit cards as often.
Stick with it — these goals aren’t easy to achieve, but they can whip your finances into shape this year.
