If you were a little overzealous at the checkout counter this holiday season, you might be a little down on yourself come December 26th when the reality of your frivolous holiday hits.
Hey, holiday debt happens to the best of us. And at least you showed off your giving side to the ones you love most. (Or at least tolerate the most…)
But if you’re worried that you’ll be paying off Christmas, 2012 well into the summer of 2013, then it’s time to get a payment plan together to avoid a pile of debt.
Not to worry; the new year is a great time to start over, and there are a few actions you can take to begin paying back that holiday debt quickly before interest fees become a credit killer.
1.) Consider transferring your credit debt to a new 0% interest card
This is especially helpful if you used your credit card a little more than you were hoping to over the holidays. If you plan on paying back the holiday debt you racked up over a few months, then odds are you’ll be paying some interest fees on these monthly bills, too.
If you want to skip these fees (and we think you might), then consider transferring that credit card debt to a new balance transfer credit card with 0% interest.
Balance transfers are a real tool when consolidating finances and saving money because they eliminate interest – it’s that simple. If you believe it’s going to take a while to pay back that balance even without interest, then it’s recommend that you apply for a card with an extended intro period. (12 to 18 months.) That way, you can pace your payments without cleaning out your checking account all at once.
Most credit cards offer the balance transfer option, but fewer include it in the 0% intro period. Remember to make sure that balance transfers are in fact included in the intro period of the credit card you are applying for.
2.) Use your tax return to pay back debt
If you’re lucky enough to receive a tax return in 2013 (rather than paying up), then you’ve essentially got some free money coming your way early in the new year. What better way to use your tax return than to improve your personal finances?
Paying back your credit card debt with your tax return is a no-brainer. You’ll be able to rid yourself of piling balances – or at the very least minimize them – with little or no detriment to your checking or savings account.
As your filling out taxes in 2013 and you know you’ve got some outstanding balances you want to rid yourself of in the new year, get in the mindset that you’re going to use your tax return to pay back your debt. It’s a set-it-and-forget-it mentality, since we know the allure of free money is obviously enticing. (And it’s a lot more fun to use your return on a sweet new flat-screen TV, instead.)
But if you promise yourself that your tax return will be used to pay back your holiday debt, then it will be a lot easier to part ways with that free check post-April 15. Being an adult can be a bummer, but sacrificing your tax return from 2012 will have a great impact on your personal finances come 2013.
3.) Reduce your spending
One final way to pay back your holiday debt quickly is to reduce your spending in the new year for as long as you need to get your debt paid off.
It’s tough to pay back more when you don’t have the funds necessary to do so. Reduce your spending in the coming months so that you have more income available to pay off your remaining debt.
It’s up to you when it comes to what you can scale back in 2013. Maybe it means driving less, eating out less often (or not at all) and spending a couple of weekend nights in rather than hitting the town. But we would recommend doing whatever you need to do to temporarily limit your spending, even if it means a few more quiet nights each month then you’re used to.
The new year is the best time to start afresh, especially when it comes to your personal finances. Pay back your holiday debt from 2012 quickly to avoid it becoming a major problem come 2013.