Help! I Spent too Much on the Holidays

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A young woman shocked by her credit card statement
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By Donna Fuscaldo

If the holidays have left your budget overstretched, there are ways to recover -- you just need to act fast.

"No one intends to exit the largest spending season of the year in financial distress, but many of them do end up doing just that," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. She adds that the first quarter of every year is the busiest month for the agency's 650 counseling centers across the country.

While it might be tough to face the music, the first step to reducing your holiday debt is realizing and prioritizing it.

Beverly Harzog, author of Confessions of a Credit Junkie, says the best way to start a re-payment plan is to go after the debt on the highest interest rate card first and once that is paid off, go after the next one and so on and so on.

If you overspent this holiday season and know you won't be able to pay off your credit card bills when they arrive next month, experts recommend adjusting your spending habits now.

Cunningham says consumers should look at all their spending categories and aim to shave $10 off of each area. %VIRTUAL-article-sponsoredlinks%Making many smaller cutbacks will be less painful (and thus last longer) than trying to find an extra $1,000 in one fell swoop to help pay off the credit card balance, she says.

If you put a lot of your holiday gift spending on a high-interest rate credit card, Beverly Harzog, author of "Confessions of a Credit Junkie," recommends transferring the debt to credit cards with zero or low interest rates.

"The credit card issuers know people are going to overspend. During the first three months of the year, you see some very good offers to give you a chance to pay down your debt," she says.

If you decide to transfer your balance to one of these cards, make sure to pay it off during the period with the low rate. Many of the cards only offer lower rates for a set amount of time.

Keep in mind your credit score matters when it comes to balance transfer offers. "The downside is you have to have very good credit to get the best offer," says Harzog. Still, even if you can reduce the interest rate just a little bit, it will help pay it down faster.

If you are facing significant debt, it might be time to find new ways to generate extra income that is earmarked solely to paying off the debt. While it's easier to find a part-time job during the holidays, there are still employers hiring in the new year. If you don't want to get a traditional part-time job, review your talents and skillset to find alternative ways to make money, whether it's giving piano lessons, fixing computers or doing some web design.

Ed Gjertsen, vice president at Mack Investment Securities, recommends the seven-day cash challenge to break an over spending habit. With this challenge, you estimate how much money you spend each week and then take out that amount of cash at the start of the week and see how long it lasts.

"When people do this, by Wednesday or Thursday they are out of money," he says. "They don't think of all the times they swipe that card. It gives them a reality check of how much they are spending."

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Help! I Spent too Much on the Holidays

This is my personal favorite! Think of yourself as a regular monthly bill you have to pay. All you have to do is arrange to have a set amount of money directly deposited from your paycheck into a savings account each month.

I recommend using a separate savings account because if you have access to your funds in your checking account, you're more likely to spend them. Again, it might hurt a bit at first to take home a little less every month, but trust me, after a while you won't even notice it's gone. Here's a moment when the "set it and forget it" strategy works wonders.

It feels great to be rewarded for your hard work. And it feels even better to spend that hard-earned bonus on something you’ll enjoy, like a trip to France or an iPad. At the same time, the pleasure of a vacation or new gadget is short-lived compared to financial security.

So make a pact with yourself to put every bonus you get from here on out to good use. If you direct 90 percent of your bonuses straight into your savings account as a rule, you’ll still have 10 percent to treat yourself with (plus the comfort of knowing that you're building a well-earned safety net). I live by this rule.

OK, OK, this seems like an obvious one -- and easier said than done. Actually, most people spend money on more unnecessary items than they think. So take time to look at where your money is going in detail and begin to cut back. Saving $10 here and there could help you put a lot away in the long run.
Many banks offer seasonal accounts meant to save for holidays like Christmas. These accounts give you reduced access to your accounts, charging a hefty penalty each time you withdraw more than permitted. Since emergencies don't occur often, a seasonal account could make sure you're touching it only when needed (just make sure you're not tempted to blow it all on Christmas gifts).
I love this one. Chalk it up to my massive craving for organization, but I'm all about getting rid of things I no longer use. Rather than throwing these unused goods away, start selling them, and put that money into your emergency fund. All you need to do is post them to a site like eBay or Craigslist or Amazon and you can get rid of items from the comfort of your home. You can also take your clothes to a consignment shop to have them sold for you.
Instead of saving your pennies, put aside any $5 bills that come your way. Never spend a $5 bill again, and you'll be surprised by how quickly this silly trick will help you come up with a few hundred dollars to add to an emergency fund.
You could pick up odd jobs via websites like TaskRabbit.com, DoMyStuff.com, Elance.com, FreelanceSwitch.com or Sitters.com.
If you get a cash-back reward for any spending on your credit card, just make it a rule that those dollars will be dedicated to your freedom fund. It may only add up to $100 extra each year, depending on your spending, but every little bit counts.
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