Recovering from holiday spending and eliminating debt
Did you happen to overspend over the holidays? Some of us did and if that’s the case you’ll want to play catch up. Local financial expert Barry Bigelow from Great Waters Financial has tips to eliminate debt.
Looking at how much Americans racked up, Bigelow says holiday sales were up 8.5% this year over 2020. That’s the fastest pace in 17 years. He says that’s a lot of spending and most likey a lot of eye-popping credit card statements for people this month.
Bigelow has 4 suggestions for digging yourself out of credit card debt:
Organize Your Debt
• The average American has four credit cards.
• The more credit cards you have, the more chances you have to fall into debt.
• If you used multiple credit cards this holiday season, it’s important you organize all your credit card statements and know how much you owe, the due date, minimal payment amount and interest rate.
• Then consider using just one credit card moving forward. Anything more than one card can be hard to keep track of and makes it easier for you to dig yourself into a hole.
Take a Spending Sabbatical
• Detox from your holiday splurge by going one week without spending a dollar. Stock your fridge and fill your gas tank, then spend nothing for 7 days.
• Try going cold turkey first, and then gradually start spending again.
• If you are trying to reboot your budget, a spending sabbatical might be the jump-start you need.
• The point is to be more in tune with your spending habits – buying only what you need and not what you want.
Find A Repayment Strategy
• There are two main repayment strategies. The method you choose may depend on what motivates you as a person.
• The Avalanche Method is all about tackling the debt with the highest interest rate first.
• This is great for someone who is motivated by saving money, decreasing the amount of interest that could accrue.
• The Snowball Method focuses on paying off the credit card with the smallest balance first.
• This is often a first choice for those looking for instant gratification by paying off their smallest debts first.
• Both methods concentrate on paying off one debt at a time while still making minimum payments on your other debts.
Save for Swiping
• You don’t want to do all this work only to find yourself in the same situation next January.
• Take a hard look at how much you’re spending and saving each month. If you can put just $100 away each month, you’ll have a nice start for your holiday spending next season.
• Open a dedicated savings account so you’re not tempted to spend the money throughout the year.
Bigelow went on to say that it can be a difficult balancing act, but you really need to make paying off debt and saving for retirement a priority. He says you cannot put off saving for retirement. So, if you’re prioritizing paying off debt, he suggests putting enough money into your 401(k) to get the full match from your employer.