Today’s post is contributed by Amy Nickson, a passionate writer on finance. Amy is a professional blogger whom has started her own blog and also works as a contributor for the Oak View Law Group. We are lucky as this is her third time contributing here. Her first piece was a hit and discussed 6 strategies young doctors should follow for financial wellness. She then wrote about 8 strategies to live within your means to become debt free. Today she shares her thoughts on worrying about holiday debt. Please share your opinions by commenting below. We have no financial relationship.
Most of the people in our nation are now worrying about their huge credit card bills that they have accumulated during the festive season. Some of them already defaulted on their credit card bills. Maybe they spent more than they planned on last minute planning or they didn’t follow a holiday budget at all.
As a result, most of them are in credit card debt hangover now. If you are one of them whose credit card debt has already started haunting, then you should try to find out ways to get rid of debts as soon as possible.
Accept your debts first; ignoring them can be ruinous for your financial health.
Here are 9 ways you can get out of your holiday credit card debt easily:
1. Set the priority
The beginning of a new year is the ideal time to get prepared for the tax season. Financially organized people prefer to get ready for the tax time; they know that the tax season is stressful. But the tax season can be more strenuous for the people who are already in holiday debt.
Thus, you need to be more organized; you should prioritize your holiday debts. Pay off the debt first, after that, start preparing for the tax time.
2. Organize your holiday debts
If you have used one credit card for all your holiday purchases, it will be easier for you to manage the debt. But, if you have defaulted on multiple credit cards, then you have to arrange the debts properly. Find out which debt is costing your more. Remember, all debts are costly, but higher interest rate debts are costlier. Also, check the extent of all the debts. Thus, it will be easier for you to decide which debt to pay off first.
3. Pick the best debt payoff method
Selecting the right debt payoff method is vital. But deciding the right debt payoff strategy can be overwhelming. You can pay off your debt by following debt settlement method, debt consolidation method, debt snowball method, and debt avalanche method etc. You can take out a consolidation loan to pay off your debts as well. The balance transfer method also works well to get out of multiple debts.
Some third party debt relief organizations also offer debt relief services like debt settlement, debt consolidation, and debt management. The organization may charge you a certain fee for the service.
On the other hand, you can pay off your debt on your own by learning the DIY debt payoff methods like debt snowball method, debt avalanche method, and balance transfer.
4. Target the highest interest rate debt first
Highest interest rate debt adds up quickly; you should get rid of it as soon as possible.
From my personal experience, I can suggest you to choose the debt avalanche method to pay off your highest interest rate debt sooner.
In debt avalanche method, you need to arrange your debt by the interest rate. Your target should be the highest interest rate debt. You should make the bigger payments toward the highest interest rate debt while making the minimum payments to the rest of the debts. Once you pay off the highest interest rate debt, target the second highest interest rate debt. You need to follow this strategy until you get rid of your holiday debts.
5. Avoid debt as much as you can
Accumulating debt is easier than paying off debts. Make sure you avoid accumulating new debt. When you’re already in huge holiday debt, you shouldn’t accumulate further debts. Remember, you have to manage your basic expenses while making your debt payments. If you continue in accumulating debts, it will be difficult for you to manage your finances.
6. Turn unwanted gift card balances into cash
This is the right time to use unwanted gift cards that you don’t want to use. Yes, gift cards are as good as cash. How can you turn unwanted gift cards into cash?
- Go online to find out the portals where you can sell your gift cards. For example. eBay.
- You can also try some gift card exchange websites to turn your gift cards into cash. For example, Cardpool, CardHub, Raise.com ,and Gift Card Granny etc.
7. Consider debt snowball method
Most of the financial experts suggest to follow the debt avalanche method for paying off the holiday debts. Getting rid of the debt which is costing you more makes sense. But, many studies found, following the debt snowball method also works great.
In debt snowball method, you need to target the smallest debt first. Make larger payments on the smallest debt and minimum payments to the rest of the debts. Continue the process until you payoff all the debts. This process will also build a sense of confidence in you. Because, you will find positive result sooner.
8. Cut down your unnecessary cost
Remember, to pay off your holiday debts, you have to make changes in your budget. You need to include debt payments in your budget including other necessary expenses like utility bills, grocery, gas, mortgage payments, insurance bills, and medical cost. To manage all these costs, you have to cut down unnecessary cost.
- Revise the budget to find out extra costs that are costing you money.
- Try to live within your means. Examples; don’t go overboard on your winter fun, don’t eat out, and don’t use your credit card randomly.
9. Set aside money
The power of a savings cushion is unbeatable. People who tend to cross their holiday budget should start setting aside money as earlier as possible. Christmas and new year celebration are no surprises. They come each year at a particular time. So, why don’t you start saving money from now? If you do so, you will have enough money in your hand to enjoy your holiday without falling into debt.
Lastly, I would like to suggest you to avoid using credit card unnecessarily. Just keep in mind that- “If you can’t afford an item with cash, you will never be able to pay the credit card bill”.
Buying an item using the credit card is easy, but paying the credit card bill is difficult. Remember, you should pay the credit card bill within the stipulated time; otherwise, you will be in credit card debt. Thus, it is important to analyze your affordability instead of using credit cards randomly. No matter what purpose it is, you should restrain the usage your credit cards.