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When the holidays roll around, it’s easy to find yourself spending money you didn’t plan on. From gifts and travel to parties and decorations, it’s essential to be prepared for unexpected expenses during and after this time of year.
Now that the holidays are over, it’s time to start thinking about the year ahead. If you find yourself over your head with holiday expenses and debts, it’s time to face them and figure out how you’ll pay them off while still living within your means.
Here are five tips for getting back on track financially from holiday spending blues.
Build a Budget
The most important thing you can do is figure out how much money you have coming in and then how much you spend. Keep track of every expense, no matter how small it may seem. It will help you understand your expenses and spending habits.
For example, monitoring expenses can help you realize that buying $5 worth of coffee daily during work could add up to $1,825 at the end of the year. That’s almost enough money to pay off some or all of your credit card bills or debt from the previous holidays.
Lastly, put together a monthly budget based on real numbers rather than just assumptions or wishful thinking about what might happen next month. This way, the budget becomes an honest representation not only of income but also of spending habits. More importantly, it’s a tool for making better financial decisions.
Cut Out Spendings
There are two main ways that people usually try to cut their spending. First is by making a list of all their expenses and looking for areas where they can save money. Doing so is a lot easier if you keep track of everything throughout the year.
With a list in hand, start looking for ways to cut back on spending in every category. Take the following as examples:
- There are many ways to save money on groceries. You can use coupons, buy generic or store brands instead of name brands, and avoid impulse buys (or plan them ahead).
- For utilities, keep an eye out for promotions like “free nights” at hotels or discounted movie tickets on Tuesdays.
- With entertainment expenses like movies and restaurants, consider making your own popcorn at home or eating beforehand so you won’t be tempted by overpriced concessions while watching the latest blockbuster release.
- When it comes to transportation costs, consider alternative options that may be cheaper than what you’re currently doing. For example, biking or taking public transit could save you more money instead of driving everywhere in your car daily.
The second way is by looking at what they spend each month, finding overspending areas, and cutting them altogether. This works better if you have already been keeping track of your spending during the year but haven’t looked yet at how much money is being spent on certain things like groceries or entertainment.
Make Saving A Habit
One of the best ways to get out of holiday spending debt is to make saving a habit. This can be tough for some people, but it becomes much easier if you have a goal in mind and commit to it.
Make sure you set aside money for your future self. That could mean investing in your 401(k), putting money away into an emergency fund, or saving up for something fun like travel or a new home appliance.
Use Credit Cards to Pay Off Holiday Debt
Using credit cards is the go-to solution for any holiday debt, especially if you don’t have cash on hand. This tactic works even better if you have a low-rate or no-interest introductory offer on your card.
However, be careful when using your credit cards. They have incredibly high-interest rates as high as 30%—and can charge finance charges on balances that are only partially paid off each month. That means that by paying just part of your monthly balance, you’ll end up paying more money in the long run than if you had borrowed from another source and paid off the entire amount immediately.
Opt for Personal Loans with Low-Interest Rates
Another way to pay off holiday debt is through personal loans. A personal loan is often referred to as an easy online loan since they’re relatively easy to obtain digitally. The interest rate for personal loans is typically lower than for credit cards. With a low-interest rate and easy approval process, it’s a good option for those who want to get back on track financially.
Also, personal loans offer you a way to borrow money for whatever you want (as long as it’s legal). You can use them to pay bills, invest or even buy new furniture for your home or car. While you can use them however you like, other personal loans, especially those that are unsecured, may still come at high-interest rates, so make sure that whatever you spend the money on is worth it.
If you need more time before paying back your loan, consider applying for an installment plan rather than just taking out one lump sum immediately after approval. This way, payments are spread out over several months instead of all coming due immediately, which might cause problems if something unexpected happens, like sudden unemployment.
The holidays are a time to celebrate with loved ones, but they can also be a financial nightmare. The best way to avoid overspending is by planning, saving, and setting clear spending limits. Remember that the most important thing is enjoying yourself while staying in control of your finances.