Wednesday, January 4, 2012

How to Recover From Holiday Debt - Part 1

So, if you didn’t take my advice in 2011 and use a Christmas fund to complete your shopping or incorporate the returned gift of lay-away to keep your budget intact, there’s a great possibility you might have more debt today than you did about 30 days ago.  So, while you genuinely enjoyed the traveling, gift-giving and extra time spent with family and friends this past holiday season, if you’re like most people, those warm memories haven’t halted your New Year anxiety as you prepare to deal with the consequences of your overspending.  Figuring out how to recover from holiday debt can be a daunting process, but here are a few tips to get you started:

1. Get clear about your goals. 

Let’s face it. You may have ended up in debt this holiday season because you had no real goals guiding your financial decisions to begin with. The reason most people fail at goals is because they don’t create any specific enough to create intentional behavior.  So instead of making your goal this year to “get out of debt,” create focus by being specific. For example, a goal like “I will pay off my Bank of America credit card of $989 by June 1, 2012” is much more effective. In addition, make sure to follow up the goal with monthly steps to keep you on track.

2. Create a debt elimination plan.

Look at your budget and determine how much extra money you can use towards paying off your debt. If you have multiple bills as your goal to pay off this year, use the snowball method by adding all the extra cash you find to one debt, while paying the minimum on the rest.  When your first debt is paid off, add that entire payment to the minimum payment of the next debt in line and continue until each debt is actually eliminated.  Be prepared to make the necessary monthly sacrifices in your budget in order to pay off those few days of “memories.”

3. Return what you don't need or want. 

One of the quickest ways to reduce debt is to eliminate all non-essential debt as quickly as possible. Rather than holding on to duplicate gifts or things you don’t want or need, return them for the cash. If you can’t return them, then exchange the gifts for items you regularly use and may need now or in the upcoming months.  Use the cash you would have spent purchasing those items to add with your minimum credit card payments for the next few months. And, if all else fails, put it on Craigslist. The money you could make and put towards decreasing debt is always going to be better than keeping stuff around and increasing clutter.

Look out for the remainder of the tips on my YouTube channel HERE.

Until Next Time,
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