February 21, 2011
Steps to paying down holiday debt
Editor’s note: Today is the launch of “Money Matters,” a new weekly personal finance column by local financial expert Michael Camacho.
The tree is down. The lights, ornaments, and decorations have long since been packed into boxes and placed in the closet. The kids (and maybe even you) are playing with the new toys and presents. Vacation is over and the kids are back in school. All that is left of Christmas are memories of family and friends — and holiday debt.
Holiday debt can sneak up on even the most aware and cautious of holiday spenders. The Christmas season is over, but here come the bills. The bottom line number might be a little surprising to you: “Did I really spend that much?” Don’t let it get you down. Here are a few simple steps to take control of your holiday debt.
Get some extra cash
- Were your eyes bigger than your wallet? You could possibly have a few items that weren’t given during the holidays and you might still have the receipt. If possible, take it back to the store and get a credit on your credit card. If the purchase was made with cash or check, use the refund to pay down the credit card debt.
Stop your spending
Are the bills coming in the mail creating a pain in your stomach? Don’t use your credit card to keep buying if you’re prone to use impulse buying to make you feel better. Put your credit cards away now! Charging more will only lengthen the time it takes to pay off your debt. Every dollar you charge will add more time to pay off the past Christmas debt. The short term pleasure of the impulse buy isn’t worth it.
Be honest with yourself
- It’s time to be honest with yourself. Avoiding and pretending the holiday debt doesn’t exist will only make things worse. It is cliche but true: honesty (with yourself) really is the best policy. Each month you put off making a payment or not paying at all, you will be charged a late fee. Late payments will be reported to the credit bureaus and will affect your ability to borrow in the future.
Create a pattern for success
- Success breeds success. After you have been honest about what you owe, write down your balance and each time you make a payment subtract from the total. Seeing your monthly progress will encourage you to keep at it as your holiday debt disappears. Nothing will make you feel better than watching that balance get to zero.
Pay down one card; then go to the next card
- Can’t figure out which credit card or holiday debt accounts to pay first? If you have many cards or accounts to pay, consider choosing one account and make larger payments to that one while making minimum payments to the others. When that card is paid, choose another to begin the larger payments and so on to each of the accounts.
Pay as much as you can
- Always try to pay more than the minimum due. Any extra money toward your debt is always a good thing to do. You’ll pay off the balance faster and you’ll pay less in interest. Doing this might strain your monthly budget a little bit, but over the long run, you’ll be glad that you made the commitment to tackle the debt head on and to straighten out your household finances.
Michael Camacho is president and chief executive officer of Personal Finance Center. He has more than 18 years experience in retail banking and with financial institutions in Guam and Hawaii.