With 2020 having been such a challenging year, many people treated themselves to a little retail therapy… okay, a lot of retail therapy. Whether you’ve splurged on a few special gifts for loved ones or treated yourself to something special, it’s important to remember that those credit card bills will begin rolling in soon.
Do you have a plan in place for tackling your holiday debt? If not, we can help.
Know Where You Stand
The most important thing is to simply know where you stand in terms of your holiday spending. As tempting as it may be to avoid looking at your bank statements or opening your bills, you’ll have to face them at some point.
Take some time to sit down and assess your holiday spending after all your major purchases have posted to your accounts. Then, add everything up to see exactly how much you’ll need to pay off.
Return Items You Don’t Need
If you were feeling extra generous this year, there’s a good chance you purchased a few gifts that were a little outside your realistic budget. If your holiday spending is adding up more than you expected, there’s no shame in returning some items or exchanging them for less expensive gifts ahead of the holidays. After all, it’s the thought that counts.
Likewise, you might consider making returns on items like holiday decor or things you’ve purchased for yourself that you don’t have a real use or need for. Getting refunds for even just a few items can help to offset your credit card bill and make paying it more manageable.
Figure Out a Viable Payment Plan
In a perfect world, you’d be able to pay off the full balance of your credit card on the due date. If you’re like many people, however, that simply won’t be feasible. If this is the case, make sure to explore your payment plan options and figure out a timeline that will work for you.
One option to consider is to pay off as much of your credit card as you’re comfortably able to. From there, make monthly payments (as much as you can afford) on the remainder until your balance is paid off. This will reduce the total amount of interest you end up paying.
If things are looking dire, you also shouldn’t hesitate to contact your credit card company; they may be able to work out a more viable payment plan with you.
Cut Back on Your Spending
After the chaos of the holidays dies down, you should also take some time to re-evaluate your budget and monthly spending. This is a great time to look for ways to free up some cash each month that you can allocate towards paying off your holiday debt.
For example, that gym membership that you bought last year and never use? It may be time to cancel and start a free, at-home workout routine instead. You can also set goals to save money by ordering less carry-out/delivery, getting rid of subscription services you don’t need, and being more mindful about your energy usage to cut down on utility bills. Some small changes can go a very long way here.
Create a Better Plan for This Year
If you feel like you overdid it last year, it’s not too early to start planning ahead for this year’s holiday spending. Some people, for example, buy gifts throughout the year so that they can avoid spending large sums of money during the holiday season. Others may set a strict budget for their holiday spending before all the sales and promotions begin so they don’t spend more than they can comfortably afford.
Another option to consider is to force yourself to only use cash for your holiday purchases. This will prevent you from charging things to your credit card if you cannot comfortably afford them. Plus, when you pay with cash, you tend to be a little more aware of just how much you’re spending (as opposed to thoughtlessly tapping your credit card).
The Bottom Line on Holiday Debt
If you’re going to be stuck with holiday debt going into 2021, you’re not alone. However, you don’t have to let today’s holiday spending create months of financial stress. By knowing where you stand and having a game plan in place for paying it off, you’ll be able to ring in the new year with confidence.
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