How to Prevent the Holiday Spending Spree from Impacting Your 2011 Budget
You threw frugality out the window for a couple months but now the spending is over and reality is setting in. Credit card bills are coming due and you must pay them off while setting up your New Year Budget.
Hopefully you put enough money away to eliminate your debt, unlike over 13 million Americans polled by Consumer Report who are still paying off credit card charges from the 2009 holiday season. If you are like one of them and don’t have the extra savings to eradicate your holiday debt then you’ll need an emergency budget session so you can make a plan.
First off, keep a notebook with you for a couple weeks and record all of your spending. You may be astounded to see how much you are paying out on non-essentials, like coffee in the morning, lunches or wasteful expenses at the supermarket.
Once you get a grip on your spending create a budget. Make a list of all bills and all income. If you aren’t bringing in enough income to pay off the bills then you need to make changes, fast! Cross off all non-essentials such as going out to eat, gym memberships if possible (you can always start jogging or walking in the neighborhood – it’s free) and anything else you can think of. Budget in gifts for birthdays and holidays and start to be frugal again.
Prioritize your debt by interest rate. If you have more than one card then pay off the higher interest rate card first, otherwise you’ll be paying off interest instead of principle and that will get you nowhere. If you do have more than one card think seriously about reducing the number. One card is enough.
Watch your credit utilization ratio. This is determined by how much of your available credit line is being used. If you carry large balances then the ratio will be damaged. You can find out the ratio by dividing your monthly account balance with the credit line. Using less than 10 % of the line will keep your ratio healthy and your credit score higher. A bad credit utilization ratio translates into a bad credit score.
Earn extra money. You might be able to find a part time job or you can clean out the garage, attic and basement and sell the things you don’t need on eBay or at a garage sale.
Reduce your energy bills. Use less heat during the winter and cool air during the summer. Make certain your house is well insulated; check for drafts around windows and doors and plug them up. Water your lawn less and check for any leaks or dripping faucets. The little things help you save money.
Stick to your budget. Once you lose track of your spending or deviate from your budget terrible things, financially speaking, will start to occur. Be disciplined and pay off your bills on time. And remember to make a holiday spending plan for next year so you won’t have to scramble to pay off your debt once again.