6 Ways to Recover from Holiday Debt
Now that the holidays are over and the credit card statements are rolling in, it really does seem like it was all a blur. A holiday splurge is incredibly common, and if you are using your credit card to pay for it all, things have a way of sneaking up on you. Sure, it may seem like it’s just a few gifts for friends and family, and the odd bottle of wine to serve with dinner, oh and an extra trip to the grocery store or two, and… Hey, it really does add up! Before the holidays we shared a post on avoiding a holiday hangover for your credit. If you missed that, or you found it too late, don’t worry! It’s not too late to recover from holiday debt and repair any damage that was done to your credit.
More than the Minimum, Less than the Maximum
Some people think that as long as they make the minimum payment on their credit card, everything is awesome, even if they’re just below the limit. While it’s true that making the minimum payment every month is mandatory, you’re actually going to have to do a little better than that, especially if you want to improve your credit rating. The way you use your credit cards can account for about 30% of what goes into determining your credit score. If your holiday spending brought you all the way to the limit on one or more credit cards, you could find yourself in credit trouble in a hurry. Starting with the highest interest rate card first, start paying more than the minimum each month, and keep going until your debt is gone, or at least at a much more manageable level. If you get paid twice a month, make an extra payment on your next paycheque too just to tackle it more quickly.
Don’t Skip Bill Payments!
It’s easy to get behind on bill payments when you’re struggling to get caught up on holiday debt, but it’s a problem that will only get worse. There is no such thing as “optional” bill payments, but things like your rent or mortgage and car loan payment are non-negotiable because they involve the roof over your head and your means to get to and from the job you need to pay your bills. This is especially true if you have qualified for a no credit or bad credit car loan. All the work you have done to rebuild your credit with on-time payments can be undone with just a single missed payment, and it’s just not worth it. Pretending the bills don’t exist really doesn’t make them go away, so bite the bullet and brown bag your lunches between now and… August.
Declare a Moratorium on Credit Card Use
This one should go without saying, but we’re going to say it anyway… While you’re paying off your holiday debt, you can’t add any new credit card charges for non-essential purchases! It’s hard not to give in to temptation, especially when you’ve been feeling deprived. That’s why it’s best to avoid it altogether. Unsubscribe from your favourite retailer’s sales emails. Don’t pass the time on your lunch break shopping. If you have that one friend who you always seem to get into trouble of the financial variety with, take a short break from hanging out with them. This doesn’t have to be forever, but you’ll get out of debt and back to your regular life if you pay it off quickly.
Many Happy Returns
Do you have unused items from the holidays? How about that unworn ugly sweater that Aunt Edna, bless her soul, left the tags on? Returning unused and unwanted merchandise can help you tackle your debt, not to mention help to control the clutter in your home. If you are thinking of hanging onto something for next year or planning to re-gift it, don’t. You’ll never find those red and green napkins when you need them next year, and your friends don’t want Aunt Edna’s ugly sweater either. Money to pay off your debt NOW is more useful than the chance of a potential gift idea NEXT YEAR.
Find Other, More Frugal Ways to Have Fun
When cutting back from a debt overload, things can get boring really quickly. Come up with some ways to have fun that don’t involve spending a lot of money. Have you been to your local library lately? They have more than just books available to borrow, there’s often a huge collection of movies and music too. Have friends over for fun at home rather than expensive nights out. If you’re really strapped for cash as you recover from holiday debt, make it a pot luck gathering and have a theme night to encourage creativity.
Don’t do it Again!
It may seem odd to talk about savings in the midst of talking about debt, but it’s an important point. A small savings fund of even $10 a week will put about $500 towards your holiday spending next year. Think about how stressed out you feel about trying to manage your debt right now. Wouldn’t you like to avoid that pit in the bottom of your stomach next year? You can with a little bit of forethought this year.
Are you worried that with the ghosts of holidays past you already have bad credit, and will therefore never qualify for a car loan? At Auto Loan Solutions we specialize in finding the right auto financing for everybody, and we’re good at what we do. If you need to get behind the wheel, fill out our easy online application form on the right side of this page today.
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