The holidays were glorious and brilliant, but the new year is here and so are the bills. You’re not alone if your credit card balances soared and bills are piling up. We’ve put together some tips to help you recover smoothly and avoid another spending hangover in the new year.
Give Your Credit Cards a Holiday
Your credit cards probably worked overtime over the holiday season, so now is the time to give them a rest. Put them away physically and turn off credit payment apps on your phone. Use a debit card or cash to pay for essentials and pay bills directly from your bank account. This way, you’ll get an accurate picture of your basic needs and expenditures.
If you’ve found yourself in a debt hole, the first step is to reduce the amount of interest you’re paying. Low balance transfer credit cards allow you to move the existing balance of one credit card to another. While your debt still exists, you are paying it off with another card with a lower interest rate.
Some balance transfer cards can have interest rates as low as 0%, for example, the MBNA True Line® Mastercard®. The low-interest rate on these cards, however, is typically only available for a promotional period. So, you want to make sure that you pay off your balance before the promo period ends.
Pro-tip: Once you’ve moved your balance, it’s best to keep your card out of your wallet. Any new purchases made on it will be charged the full, non-promotional interest rate, with no grace period.
Try Setting Goals, Not Resolutions
Do New Year’s resolutions work? A 2018 survey of Canadians’ New Year’s resolutions showed that a third of people resolved to improve their financial health, and a quarter of them resolved to strengthen their money management skills. Resolutions are a good start, but setting concrete goals will help you to make your resolutions a reality.
Once you know basic needs and expenditures, you can determine how much money you can pay toward your holiday debt each month. Next, choose a date and set a goal for paying off your holiday debt, along with the number of monthly payments required. When you set this goal, you’ll need to be strict with your budgeting and eliminate any extras.
You may want to consider taking on part-time or temporary work or plan an alternate source of income until you’ve paid off the debt. If you can combine budgeting with making the maximum payments you can afford every month, you’ll be more likely to pay off your holiday credit card bills quickly.
Planning for Upcoming Holiday Seasons
If you have a particularly bad case of Blue Monday shock with high credit card bills, or if you simply feel you’ve overspent, you can start saving for the next holiday season now. Combining paying off high bills with a savings regimen can seem difficult, but it’s a necessary step toward overall financial health. Combine your budget for paying off the debt with a savings goal.
After you’ve set your monthly budget, work toward building your savings by transferring money into your savings account first, before you make any other expenditures. You can also tell family and friends that you’re making some changes and handling your budget differently, so they encourage you along the way by not tempting you with that daily coffee treat or lunch out you may be accustomed to.
Once your finances are in order, you’ll be ready to tackle the whole year with a new financial outlook.