If you got carried away with your holiday shopping in your eagerness to find great gifts for family and friends, you might have to suffer the consequences when January arrives and you look at your bank account balance. Recovering from a holiday shopping extravaganza isn't always easy. If you need some guidance, our tips can help you clean up any financial messes you might have made.
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1. Assess the Damage
Once you've finished exchanging gifts, it's important to gauge how your shopping affected your finances. Looking over your bank account statements is a good first step. So is finding out your credit score and checking your credit report for errors that could be pulling down your score.
From there, you can figure out how long it'll take you to pay off your credit card debt. You can do the same with any other loans you might have taken out to buy jewelry for your mother or a new watch for your cousin.
2. Prioritize Your Debt Payments
Next, you can decide which sources of debt need to be paid off first. You might be thinking, well that's easier said than done. But planning and prioritizing your payments doesn't have to be complicated.
You have bills that you can't ignore. For example, your utility bill must be paid if you want working lights and energy to use during the winter. Mortgage bills and rent payments are equally important if you don't want to get kicked out of your home.
After that, it's a good idea to focus on paying off your secured debts since secured debt is tied to some form of collateral like your house or your car. Then, you can attack your remaining unsecured debts, including your credit card debt, by putting money toward the debts with the highest interest rates. Those debts are taking the biggest bite out of your paycheck, so it's best that you eliminate them as soon as you can.
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3. Boost Your Credit Score
If you've taken on debt over the holidays, doing whatever you can to improve your credit score is key, especially if you want access to the best rates on other loans or you'd like to buy a house in the near future.
Taking care of debt can bring your score up a notch. You can also make an effort to lower your debt-to-credit ratio by using your credit card less often or transferring balances so that one or two cards aren't close to their limits.
4. Cut Back
At this point, you might have no choice but to reduce your spending in order to pay all of your bills and boost your credit score. You can take a systematic approach by reviewing your budget and choosing specific expenses that you can eliminate. You don't have to give up everything that makes you happy, but something may have to go.
Skipping the January sales you usually partake in and cooking at home instead of going out to eat regularly are two ways to save money. You can also consider brewing your own coffee or using the machine at work rather than making the trek to Starbucks or Dunkin' Donuts every morning. Little changes and adjustments can make a big difference when you're trying to revive your finances after the holidays.
Related Article: Top 6 Steps to Start a Spending Diet
5. Brainstorm Ways to Increase Your Income
If the holidays really wrecked your finances, you might need to take on a second job or side hustle. That's not too realistic, though, if you're already working 40 or 50 hours a week. Luckily, there's more than one way to earn extra money.
Hosting a garage sale or selling your unwanted items online might give you the income boost you need. Plus, keep in mind that tax season is approaching. Getting organized and filing your taxes early means you'll receive your tax refund earlier.
Start Saving for Next Year's Shopping Trip Now
If your bank account is already running low, saving might not be one of your top priorities. It's important, however, to add saving money to your to-do list, especially if you're planning to go on a shopping spree during the next holiday season. Having money stowed away that you can use to buy next year's gifts can keep you from having to dip into your emergency fund or take out a loan at the last minute.
Photo credit: ©iStock.com/mediaphotos, ©iStock.com/Susan Chiang, ©iStock.com/Rich Legg
The post How to Recover From a Holiday Shopping Spree appeared first on SmartAsset Blog.
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