Holiday Debt Hangover: Get Your Finances Back On Track |
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There are thousands of Americans who have the same problem with their credit cards: holiday debt blues. After two months of office parties, gift shopping and entertaining, your cash flow and credit cards are a mess and you're left with a pile of bills, a plunging bank account balance and the worry of lost financial stability. To tackle this problem, the first step is to face the facts. Once the credit card bills start flowing in after the holidays, make an assessment of the total amount due, the number of credit cards you carry a balance on, the percentage rates for each card and the minimum due. You should always remember that the time to act is now. Late payments can turn into bad credit, hindering you from owning a home or even getting a job. Call your credit card company to negotiate lower fees, reduced interest rates, or a promotional package. If your credit card company is hesitant, let them know that you might move to a different company. Try to convince them to drop interest charges for a few months. Though many people are tempted to roll over their debt to a credit card with 0% interest, the advice from experts is to use caution. A zero balance on an old card can tempt you to ring up new expenses. People with credit card problems are advised by experts to first pay off the lowest credit card balance. There's no truth to the statement that paying just the minimum will never get you out of debt. Provided that your current debt is not increasing, you can pay off old debt. To understand how the plan works, let's presume you have four debts. Add the minimum due on each card and commit to paying at least that minimum each and every month. Sort the debts according to size, starting with the one that has the shortest pay-off time first and the one with the longest pay-off time last. With each debt paid off, the money you spend to pay off the debt will apply to the regular payment of the next debt and so on, until your entire debt is paid off in full. Once you've negotiated with your creditors for some concessions, it's time to determine how to pay down your debt in order to eliminate problems with credit card payments. Consider your monthly income and monthly expenses to work out your debt. Figure out how you can fit your credit card debt into your overall budget. This might be difficult if money is tight, and you might want to consider taking up a part-time job until you pay down the debt. Or use a portion of your savings to pay your debts, but never deplete your emergency resources. Next, work out a spending plan. Your salary, monthly expenses and debts should all be written down. Budget realistically so you don't lose heart. For the first three months, monitor all of your expenses. After three months, you'll be able to understand where you can make some cutbacks. Still, being unable to get money to pay off your debts is no cause for panic. Get in touch with an agency affiliated with the National Foundation for Credit Counseling. They'll help you create a budget and estimate the time it will take to overcome your problem with credit cards. Reputed nonprofit agencies charge a minimal counseling fee, usually not more than $50. It is also possible to work directly with your creditors. Some personal therapy may also be preferable to understand the reasons you got into debt. You have to start planning now for the next holiday season to avoid ending up in the same situation again. |
