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Tips for Paying Off Holiday Debt
7:08 PM, Jan 12, 2017
Tips for Paying Off Holiday Debt
GREEN BAY -
Dean Listle, a financial professional from Secure Retirement Solution joined us on Wisconsin Tonight to talk about tips for paying off holiday debt.
-How big of a problem is holiday debt?
A big problem because shoppers are turning to credit cards to pay for the holidays.
Nearly half of Americans plan to use a credit card to purchase their holiday gifts this year.
Many will pay off balances right away, but 5% of Americans who used their credit cards during the holidays last year still have not paid off that debt.
-If we have credit card debt, how do we start paying it down?
Here are five steps:
1. Get Organized
Your credit card debt may seem daunting or overwhelming, so start with the simple task of getting organized.
Gather all of your statements, and write down the balance, payment date and interest rate on each credit card.
You can utilize a debt worksheet, like the one on my website, srsplans.com.
Once you have your debt organized, you can create a plan to pay it off.
2. Go Lean
If you’re like many people, you splurged over the holidays-- on both food and finances.
Go lean in January and February. Try cutting out coffee runs and limiting yourself to one meal out a week.
Use any gift cards you received over the holidays to help you cut down on spending. If you got some new movies, watch them at home instead of going to the theater.
There are ways to cut back without cutting out all the fun.
3. Build Momentum
Start with the credit card with the lowest balance and devote as much of your income as you can afford to paying off that one card.
Make sure you are paying the minimum balance on every card to avoid fees and penalties.
Once you pay off the balance on the smallest card, move to the next smallest balance.
That rush you get from paying off each card will help build momentum and keep you motivated.
4. Get a Lower Rate
Credit card companies want their money back, so they’re often willing to work with customers to pay down debt. Ask if you can get a lower interest rate.
If they aren’t willing to do so, shop around for a lower rate and transfer your balance.
But make sure you know what you’re signing up for. Credit card companies often offer a low introductory rate and raise it after a few months or a year. Also pay attention to balance transfer fees.
5. Look to the Future
You don’t want to do all this work to pay off your holiday debt only to find yourself in the same situation next year.
Take the total amount you spent on the holidays this year and divide that number by ten. Now, commit to saving that amount each month from January through October.
For example, the average shopper was expected to spend about $935 in 2016 .
If you can put away $90-$100 each month, you’ll be in good shape once the 2017 holiday season rolls around.
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