Lots of Debt After The Holiday Season? It's How to Bounce Back After The Holidays

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Lots of Debt After The Holiday Season? It's How to Bounce Back After The Holidays

11/28/2017

If you wake up with lots of debt and much holiday spending today, you are not alone.

According to Experian Holiday Shopping Survey, 60 percent of adults say that holiday shopping puts great pressure on their finances.

"We had Black Friday, then Dark January," said Rod Griffin, director of public education at Experian.
Consumers tend to find themselves trying to get out of debt and get back on track financially in the new year.

This is typical because they spend more than they expect during the holidays and use credits to fund their spending.

If you go beyond your vacation budget, collect debts and spend your savings, you can bounce back.
Here are 10 steps you can take to get your finances back in shape in the new year.

Lots of Debt After The Holiday Season? It's How to Bounce Back After The Holidays

1. Review your Holiday Spending

The first step you should take after the holidays is to review all your expenses, says Bruce McClary, spokeswoman for the National Foundation for Credit Counseling.

Look at how much you pay onto a credit card, how much you spend on savings and categories you spend - like gifts, food, and entertainment.

"It gives you a good starting point to get out of debt and rebuild the savings," McClary said.

2. Make a Plan to Handle Debt

Many consumers will dig out of debt in the new year.

Those surveyed by Experian estimate to wear about a quarter of their holiday spending to credit cards.

To quickly eliminate the debt, you need a plan.

"The worst thing you can do is plan to pay the minimum payment," McClary said.

"The debt may be around for the next holiday season, and maybe on the road of purchases and planned activities."

Ideally, you should pay off your credit card balance within one to two months, he said.

If you owe more than one credit card, he recommends using one of these two strategies: handle the smallest balance first or pay the card with the highest interest rate.

"The most motivating process is what you have to live," McClary said.

You may need to tighten your belt to erase your debt quickly.

"Look at the day-to-day expenditure to find ways to reduce overpayments for debt repayments," said Bethy Hardeman, a key consumer advocate at Credit Karma.

You can also put yourself on a cash-only diet so you can not collect more debt because you are trying to pay it off.

3. Put the Extra Cash Toward It

In addition to reducing, look for ways to earn more money in the new year to pay off your debts, or to rebuild savings that you might duplicate to cover holiday expenses.

The first place to earn extra money is on your paycheck.

Two-thirds of human resources and hiring managers say their company plans to provide holiday bonuses this year, with an average bonus estimated at $ 858, according to a survey by Principal Accounting.

Given that consumers surveyed by Experian say they plan to spend an average of $ 806 over the holidays, such bonuses can easily fill out savings or paralyze holiday debt.

If you fill out a gift this holiday season, you can make room for your new stuff by selling some of the older online stuff, says Farnoosh Torabi, personal finance expert, and financial education partner Chase Slate.

"It will not only help make a decision for your place, but you can get some extra money to help pay off the credit card balance that December."

You can sell clothes and accessories on sites like Thredup.com and Tradesy.com, which earn a commission to resell your merchandise.

Or you could try listing items for sale on Craigslist.

4. Set Up Automatic Payments

Nearly a quarter of adults surveyed by Experian say they have been paying late holiday shopping card credit expenses.

Not only will you be exposed if you pay your credit card bill late, but your credit score will be hit, according to the NFCC.

Torabi says that you can avoid late payments by setting up automatic payments via your bank or card issuer.

Applications like Mint Bills can also send reminders when a bill is due.

If you plan to skip payments because you can not pay your bills, McClary says that you should contact your credit card company first to find out what recovery you can find together when your account is in good standing.

"If you have good credit, there are many options to give yourself breathing room so that your credit score is not hit," he said.

5. Transfer Balance

Here's an easy to follow tip: If you have good credit, lower your holiday debt expenses by transferring your balance to a low-level card.

You can often get a 0 percent rate on balance transfers for 12 to 18 months, which can reduce the amount of interest you will pay for your debt.

Make sure you read the nice prints, though, before accepting the balance transfer offer. Most balance transfer cards have removed interest, which means you will only pay interest on your remaining unpaid balance at the end of the introductory period.

However, deferred interest offers require that you pay interest on the total amount you paid if you did not pay the full balance at the end of the introductory period, Hardeman said.

6. Develop a Support Network

You will not be the only one who needs help to return your money on track after the holidays, Torabi said.

So work with others in the same position to share your goals and maintain other responsibilities.
"Hitting the reset button on your finances is more manageable and fun with the help of friends," he said.

Some people even make clubs with bill payments - similar to book clubs - to get together with other people in debt to discuss their progress and offer support each other, Griffin said.

7. Seek Professional Help

If you really struggle to pay off the debt you need to pay or need help getting your finances back on track, get advice from a non-profit credit advisor.

"Do not be afraid to seek help," Griffin said. It will not affect your credit score or credit history, but it can help you manage your debt, he said. You can find a counselor at NFCC.org.

Also, consider meeting a counselor if you are knocking out savings that are destined for things other than holiday expenses.

"If you're robbing a short-term emergency savings or your long-term retirement savings, there's a big issue of priority," McClary said.

8. Avoid Quick Fixed

Even if your debt is unbelievable, you should avoid the company that promises to help you settle the debt with a dime of what you owe.

"It's very tempting, but it may also be illegal," Griffin said.

Debt settlement companies may charge an upfront fee before providing any service. But Griffin says that companies that promise credit repair must meet their bidding requirements before taking the money.

9. Monitor Your Credits

Holiday spending has a negative impact on the credit score of 10 percent of consumers, according to Experian's survey.

So it's important to see where you stand by reviewing your credit report. Griffin says that your score should include risk factors that affect your value and which areas you should focus on to help build your credit.

Another reason to monitor your credit report and your credit account strictly after the holidays is looking for signs of cheating.

If you see any unauthorized charges for your statement, contact your credit card issuer immediately to cancel your card and dispute the charge.

Check your credit report for accounts you do not know, which could be a sign that someone has used your identity to get credit on your behalf.

You can sign up to get a free credit monitor on sites like Credit Karma, who will notify you if there are any changes to your credit score or report.

Or you can pay for services like Experian's ProtectMyID, Identity Guard, and LifeLock to monitor your credits, public records and other data points for your suspicious identity use.

10. Start Savings for Next Year

Help yourself avoid the next year's hangover by saving year-round. Add all your vacation expenses, and divide that amount by 10 to determine how much you should set aside each month from January to October.

That can help you save time when the holiday shopping season begins in November, McClary said.
If the monthly amount is too high, create a strategy to have a more affordable holiday season next year, he said. As you follow these steps to bounce back, try to stay positive.

"Patience is the key - do not be discouraged," McClary said. "You have time to get back on track.
It's a matter of devoting enough time to sit down and make a roadmap."