It’s a familiar cycle for many Americans. You dream of having this wonderful holiday season with your family and friends. You have visions of your loved ones opening the perfect gift and having a warm smile on their face. You think about the perfect meal with everyone gathered around a table together, no matter how far they’re spread around the world the rest of the year.
And, to make that vision come true, you pull out the credit cards.
Maybe you pull off most of that vision of the perfect Christmas. Maybe it doesn’t quite work out. Either way, after the holidays are over and the presents are opened and your uncle has overstayed his welcome, you’re left with a bunch of credit card debt.
What’s next? How do you handle this little (or big) bubble of debt before the interest begins to have a real negative impact? And how do you prevent this from happening next year? Here’s a guide to handle both situations.
Start by making January and February lean months for spending. You’ve just enjoyed a plentiful holiday season, so reconcile that with a couple months of cutting back. That doesn’t mean you start eating nothing but lentil soup, but it does mean you can sacrifice some of the splurges you typically enjoy during those months.
Channel that savings directly into big credit card payments. Take a look at your credit card bills, and figure out which one has the highest interest rate. Then channel your extra payment toward that card. Make the biggest payment you can possibly afford while still paying your other bills and making minimum payments on your other credit cards. This route will help you pay off your cards the fastest.
Look for zero-interest balance transfer offers. Before you send in that big extra payment, though, spend some time looking through credit card offers for balance transfers that allow you to pay 0 percent interest on that transferred debt for a certain period of time. If you can transfer everything to a 0 percent interest offer, that’s great. If not, you should still make extra payments on your highest interest debt. Just make sure you get the transferred balance paid off before the zero interest offer ends.
Sell unwanted items. You’ll find that after the holidays, you may have some unwanted items around your home, including gifts you receive and old items that new gifts may replace. There’s also the spring cleaning period that people start at the first glimmers of warmth. All these things result in items you can sell to earn a bit of extra money using services like Craigslist and eBay, and then you can channel that money into even bigger extra payments on your highest interest credit card.
Start a savings plan for next year’s holiday season. The best time to start a savings plan for next holiday season is right after the this holiday season. If you get started right away, you can easily save a small amount each week and have a large pot of money next December. For example, if you start on the first Monday of December and save $10 a week for 50 weeks, you’ll have over $500 in the bank in the middle of next December. If you save $20 a week, you’ll have over $1,000 for holiday expenses just waiting for you. The easiest way to do this is to set up an automatic weekly transfer, something that most banks will help you set up.
Make the holidays more realistic. In the aftermath of the holidays, it makes sense to discuss some sensible downsizing with family and friends for next year. You can discuss putting cost restrictions on gifts, moving to a drawing of names for a gift exchange or dropping presents altogether. You might also want to discuss arrangements that reduce the challenges of travel on everyone, as with my wife’s extended family which recently moved their holiday celebration to a more central location that’s more convenient for everyone.
The spirit of the holiday season and the togetherness and warmth that it brings isn’t something that should cause you to go into debt. As you celebrate the season, keep in mind the things that actually matter and are meaningful for you and those closest to you. You might just find that those things don’t come wrapped in a package and don’t involve stressing out about the perfect holiday dinner.
More from U.S. News
9 Ways to Save When Holiday Shopping With Credit Cards
50 Ways to Improve Your Finances in 2016
How to Quickly Get Rid of Holiday Debt originally appeared on usnews.com
