How to dig out from December’s debt

THE start of the new year feels like a financial clean slate — right up until your credit card bills arrive.

It’s easy to forget about the entertainment and travel you enjoyed, the food and drink you consumed or the store card you applied for at the cash register. But bills jog your memory. And they may mean you’re going to have to make some changes to pay up.

So what now? We asked some personal finance bloggers how they manage to keep holiday celebrations from morphing into debt that lasts all year. Their advice: Once you make a mess, act fast to contain the damage.

Deal with remaining debt

Find money to pay down your debts by spending less or earning more; a combination is ideal.

Spending less can mean a frank talk with loved ones about trading dinner and a movie for cooking at home. It can mean cutting everyday luxuries like cable TV until your debts are paid, or starting a side hustle to bring in more money.

Pour that additional money into paying down your credit cards, starting with the highest-interest one. That’s the debt avalanche approach; it’s fastest and saves the most money.

If you have good credit, consider a balance transfer credit card offer. Tonya Rapley, who blogs at My Fab Finance, cautions that transfer fees might amount to more than you’d save, so do the math.

Rethink your assumptions

To keep the cycle from starting over, figure out why you overspent. Rapley had to come to grips with a belief that buying a gift for someone meant she valued them. For Carrie Rocha, who blogs at Pocket Your Dollars, it was thinking that a “spirit of generosity” should guide holiday spending.

Who wants to send a message that you don’t value people or you reject the spirit of generosity? But instead of spending a lot of money, spend time: Thoughtfully choose a gift that shows you really “get” the person, or arrange to spend time together or share an experience.

Plan for an all-cash holiday

Make next December better by setting a reasonable budget now and saving all year long.

Total every holiday expense, even little things: gifts, decorations, gift wrap, postage, entertainment, food, travel. Divide by your pay periods between now and December to see how much to save from each check.

Put the money out of reach in a designated savings account not connected with your checking account, or open an account at a different bank. Some people go so far as to buy Toys R Us cards to use when the holidays roll around. (AP)

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