A recent LendingClub member survey revealed more than half of Americans (55%) will probably take debt accumulated over the holiday season into the new year. From gifts to décor and travel, most holiday expenses unfortunately are added to the revolving balances of high-interest rate credit cards. (Americans add about $1,200 in holiday debt on average each year.) If you rang in the 2020 with a bit too much “cheer” hanging over your head, keep reading to get our 10 simple tips for how to get your finances in order after the holidays.
Sit down with your (and your partner’s) financial records and take stock. Take a look at your last paycheck, credit balances, and bank statements. Make sure you know who and how much you owe, and plan to prioritize. If you haven’t already, this is an excellent time to review all your insurance policies: home, property and life as well as health, dental, and vision coverages.
Getting healthier financially is easier when you cultivate a money mindset that supports your goals. Whatever your current situation—lean in to it. Write it all down. Talk openly with your family about money matters. Research shows that the state of your finances can have big effects on your quality of life. If you’ve made mistakes, forgive yourself and move on. If you’re just getting started building credit, be mindful, and remember that every financial move matters.
Make a list of your necessary expenses and payments on credit card debt and loans. Log your regular income and any extra money you expect to bring in, like from a second job. Add some luxuries you really value to the budget. (If your budget makes you feel too deprived, you’re unlikely to stick to it.) Check your credit card and bank statements for recurring payments and subscriptions. Cancel services you no longer use. Don’t forget to include making contributions to your emergency fund or savings account. Saving even a few dollars from each paycheck helps improve your personal finances and build a stronger foundation.
Take the credit cards out of your wallet and put them in the back of your drawer. Research has shown that people are more likely to overspend when they use credit cards (or even debit cards). But when you have reach for the cash to make a purchase, you’re likely to think twice about it. And, of course, if you use cash, you limit yourself to only spending the money you actually have. If you do use credit cards (for airline reservations or making online purchases), pay off the balance every month so you don’t accrue interest charges.
The more you know about finances, the better choices you’ll make. Don’t beat yourself up over your credit card balances or how much is (or isn’t) in your savings account. Commit to improving your financial literacy and learn how to make savvier financial decisions in the future. The Consumer Financial Protection Bureau has answers to hundreds of financial questions and guides to help you understand how to plan ahead to reach your financial goals.
The new year is an ideal time to set up the systems that will help keep you on track. Make paper or computer folders where you can put monthly statements for all of your accounts. Use an app or paper log to track expenses. This step alone can help you quickly understand where your money’s going. Make cuts where necessary and redirect those funds to paying down debt balances or saving. Ask your tax preparer if they offer any free resources for documenting and recording expenses.
Juggling many bills can be stressful. You also risk missing payments, which can hurt your credit score and lead to added fees. Calendaring or automating payments for your credit cards, student loans, and any recurring bills is one of the best ways to get your finances in order and stop living paycheck to paycheck. If you’re worried about canceling automatic payments, or creditors making unauthorized withdrawals, read about your rights. And if your financial planning includes having a retirement account, like an IRA, automating contributions to the account minimizes the temptation to skip them.
If you have balances on high-interest credit cards or if you’re juggling lots of bills, consider consolidating your debt with a personal loan. Depending on your income and credit profile, you could get a lower interest rate that would help you save money over your repayment period. You might also lower your payment to add some breathing room in your personal finances. Remember that consolidating credit card debt only helps your finances if you avoid making new purchases on those cards.
You have until April 15, 2020 to contribute to an IRA or Health Savings Account (HSA) for 2019. Consult your financial advisor about whether putting money in those accounts can shave your tax bill. These types of accounts are subject to a yearly maximum. By taking full advantage of the amounts that are eligible for 2019, you leave room in case you get a financial windfall and want to contribute more in the coming year.
It may feel a long way off right now, but you can start saving now for next year’s celebrations. Take a look at how much you spent this holiday season (during the months of November and December). Consider ways you could have saved, then project the amount you’ll spend next year. Divide that number by 12 and add that dollar amount to your monthly budget. Create a separate holiday savings account or use a bank that lets you divide your bank account into subaccounts. By the end of next year, you will have saved up a nice sum and less likely to rely on credit cards by the time the next holiday season rolls around.
Don’t let holiday debt get you down. Be determined and continue to incorporate financial self-care habits that improve your situation. Making just a few small changes can help you know how to get your finances in order and set the stage for a more relaxed start to the new year. If you owe holiday bills, consider checking your rate for a personal loan through LendingClub and start taking control today.
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