While the decorations may have been put away, and the wrapping paper discarded in the trash, the repercussions of holiday spending unfortunately aren’t so easily set aside. Between presents, food and drink, and holiday decor, it’s possible to rack up a lot of debt in a fairly short amount of time, or put yourself even more in debt than you already were. But as you well know, a new year is the perfect time for a fresh start, which means now is the perfect time to start managing your debt better while putting all that holiday spending behind you.
Last month we talked about how to avoid too much holiday debt. This month we’re focusing more on what to do if you still have debt from the holidays.
Your first step? Stop charging your credit cards and go on a cash diet. However, if you’re unable to pay beyond the minimum payment each month, you may want to consider other options. According to Debt.com, $1,000 on a credit card with an APR of 18% will take over five years to pay back when you pay just the minimum. Knowing that, the second step is to sit down and figure out specifically how much debt you have. Once you have a good grasp on your financial overview, you can decide how you want to tackle paying it off.
Don’t be alarmed if your debt seems out of control. While many may decide bankruptcy is the only answer, there are repercussions that go along with choosing that route. If you still need help – even after you’ve looked where you can cut household expenses, researched various repayment options, and looked for alternative cash avenues -- reach out to a professional credit counselor.
Now is the time to consider choosing a debt management program to help you pay down your debt while repairing your credit score. When you declare bankruptcy, it stays on your credit score for seven to 10 years. But with a debt management program, credit counselors will negotiate with credit card companies to consolidate your debt, lower your interest rate, and create a monthly payment that is affordable and customized to your specific situation, with repayment set in a shorter time frame. Debt management programs are designed to help with paying off unsecured loans, which doesn’t just include credit card debt, but also things like medical bills. Other perks? No constant calls from creditors and only one monthly payment to worry about.
Once you’re on the road to a healthier financial future with your customized debt management program, commit to a more financially responsible lifestyle so that you don’t end up in more debt next year. One way to do that is to be proactive and start putting money away for a holiday fund. When next year rolls around you’ll be able to breathe easy knowing that you have your debt under control.