Another holiday season has come to an end. While it is great to spread holiday cheer, sometimes we can end up spending more than we can afford, leaving us with debt that lasts longer than the holidays. In fact, in 2018, the average American accrued $1,054 in debt during this season, leaving many Americans feeling far from jolly. With 2019 approaching, we have some tips to help you pay down your debt and start your New Year on a fresh financial track.
Assess your Finances
Before you start anything, it is best to sit down and look over your financials. Start by determining all your debts. Go over what you owe on each card, minimum payment amounts, interest rates, and payment due dates. After you have determined your debt, you should look over your current monthly income and budget and see where you can begin to start making payments.
Determine a method that works best for you
When it comes to paying off credit debt, there are two approaches that can help you start paving your way towards financial freedom. The first approach is the avalanche method. This method suggests you list your debts highest to lowest based on interest rate. By doing this, you can pay off debts with the highest interest rates, saving you money. The second approach is the snowball method. This method prioritizes paying off the smallest amount first regardless of the interest rate. The idea behind this approach is you will build momentum with each amount paid which will motivate you to keep tackling each debt.
Revise your budget
Many people talk about changing their diet in the New Year, but few consider changing their financial diet. Avoiding unnecessary spending can immensely impact how quickly you pay off credit debt. Instead of a $5 latte every morning, make coffee at home. Bring lunch to work instead of eating out. Avoid activities that cost money like the movies, instead look for free activities going on in your community. The money you save on small lifestyle changes will help you achieve conquering your holiday debt at a much faster rate.
Make the most out of extra money
It is not too often we come into extra money, but when you do, use it towards paying off debt. Holiday bonuses and tax returns are both large amounts of money that we receive during the year that can be used to pay off debt. We know it can be tempting to want to indulge yourself with this extra boost in income, but you will be much happier when your holiday debt is gone and is a stress of the past.
Plan for next year
It is never too early to start planning. Create a budget and start saving now for next year’s holidays. By setting aside money each month you will build a solid budget leaving you prepared for next year’s expenses and less reliant on credit cards.
Conquering debt can be overwhelming but with these tips, we know you will soon be free from holiday debt. If you’re interested in getting help with setting a budget and organizing your finances, we have the accounts, products, and services you need. Contact us today!