Despite the best of intentions and the clearest of budgets, sometimes holiday spending can snowball out of control. It can start with an innocent extra box of ornaments or a gift for someone not on your list, and before you know it, you’ve charged the entire month of December on your credit cards and you’re facing the New Year with bills you’re not sure how to pay.
Even if you have gone overboard this year, it doesn’t mean you have to spend all of 2012 digging yourself out of the hole. Here’s a step-by-step and (relatively) painless plan for paying off your holiday spending spree.
1. Transfer your credit card balance responsibly. To avoid having to pay interest on your purchases, look into transferring what you owe to a 0% balance transfer credit card. This will give you a little breathing room to pay off your holiday excess—the transfer term is sometimes as long as year or more.
You will generally face a nominal transfer fee of around 3% of the balance, but that will still save you a great deal of money compared to your interest rate, provided you can pay the balance off before the 0% introductory rate expires. As always, make sure that you use this transfer along with a payoff plan (step 2) in order to keep yourself afloat. If you’re not sure about your ability to handle the temptation of a new credit card, then skip right to step 2.
2. Create a payoff plan. With your budget (you do have a budget, right?) and a calendar in hand, determine exactly how much you can send to your credit card each month or with each paycheck. If possible, set up automatic payments to the credit card for the day you receive your paycheck so you don’t even have to think about it. And to keep yourself motivated, start a debt payoff thermometer on a whiteboard or online. (Online thermometers are generally created for fundraisers, but they work just as well for debt payoff). A visual of how far you have come and where you still need to go will help you to remember the big picture when temptation strikes.
3. Find extra ways to make money. Even with a period of 0% interest and a payoff plan, a truly epic spending hangover may still take some time to recover from. If you want to make sure that this lapse in judgment affects as little of your New Year as possible, here are some ways to “find” extra money to send to the debt:
Go on a Financial Fast in January
Just as you might want to refrain from drinking for a while after an all night binge, you might also want to put the kibosh on your spending for some time after the holidays. Basically, you will choose a certain amount of time during which you will refrain from spending any money outside of absolute necessities. It’s very important to be brutal with the definition of a necessity. For example, you can eat through the food you have in your pantry, rather than go to the grocery store during your fast.
Michelle Singletary of The Washington Post recommends committing to at least a 21 day fast in order to see the best results. And after a month of excess, it will feel great to know just how little you need to spend in a month.
Sell Your Gifts
We all receive gifts that aren’t quite right. It may feel strange, but there’s nothing wrong with selling your gifts and gift cards on sites like Ebay and www.giftcardgranny.com. It means that the gift will truly be appreciated and that you can feel more financially comfortable. Just make sure you sincerely thank the giver. They are, after all, giving you an opportunity to get your financial ducks in a row, even if that’s not the gift they intended to give you.
Earn More Money
While there’s only so many ways you can cut your spending, your earning potential is virtually limitless. If you’re still not sure how you can pay off your debt quickly, try to find a second income stream that you can send directly to your credit card. If you find something that you really enjoy doing, you’ll be spending your time more wisely, as well.
The Bottom Line
We all make mistakes, particularly when temptations are around every cheery holiday corner. The bigger mistake would be to ignore the problem and let it get out of hand without dealing with it. Don’t start your 2012 in the shadow of your poor 2011 decisions. Take charge of your finances and make sure your New Year is a great one.
Emily Guy Birken is a freelance writer and regular contributor to PTMoney: Personal Finance. She lives in Lafayette, Indiana, with her mechanical engineer husband and infant son. Her musings on life, parenting and money can be found at The SAHMnambulist and Live Like a Mensch.