Ways to Avoid Racking Up More Debt This Holiday Season
Debt

Ways to Avoid Racking Up More Debt This Holiday Season

EPF December 13, 2019

The holidays are here again, and with it comes the several shopping rushes. Picking out and presenting gifts to family and friends can be pretty exciting, but it can also put a strain on your pockets and leave you dealing with debt in the new year.

According to statistics, the average American adds more than $500 to their debt total after the holidays – an addition that takes most people a very long time to pay off, that is, if they manage to pay it off at all. 

You might still be paying off debt accumulated over the past few holidays, but it is not too late to take charge of your finances.

Follow the few steps below to avoid racking up more debt this season so that you can start your new year stress-free.

Find Ways to Minimize Your Credit Card Interest Rate

One of the most popular ways of minimizing or reducing the interest rates on your credit card is balance transfer. A balance transfer is a process of transferring one or several of your high interest rate loans to another card with low interest.

Some credit card issuers offer great promotional interest rates to attract new customers, especially during the holidays. One of the best promotional interest rates offered is the 0% balance transfer. The offer means that you will not pay any interest on the amount of balance you transfer until the promotional period is over. 

The typical promotional period lasts at least six months, but for some issuers, this period lasts up to 21 months. With such an offer, you can pay off your entire credit card debt without the additional interest charges so long as you strive to do so during the promotional period. If you fail to clear your balance, standard interest charges will automatically be charged on the remaining balance.

The 0% balance transfer is almost always confused with the 0% deferred interest. Deferred interest is another promotional interest rate offer similar to the former but with a little tweak. You get the interest free period, but the interest on the balance keeps adding up. The accumulated charges are automatically added to the remaining debt balance at the end of the promotion period.

Find Ways to Increase Your Income

Increasing your income is another excellent way of managing your loans. With a bit of extra income, you’ll have enough money to pay your bills, which means you are less likely to get into more debt when you need it. Consider taking a second job, asking for a promotion, or looking for a job that pays better.

Save Up For Emergencies

Saving money when you have debt may seem somewhat unreasonable. However, it is wise to have a little nest egg when you are trying to pay off your credit card debts. This way, you will have something to fall back on when an emergency hits instead of charging more on your credit cards.

Live Within Your means

Most consumers live beyond their means and end up turning to their credit cards to cover the deficit – getting them deeper into debt.

To avoid such a situation, make a detailed holiday budget that is within your income. Keep in mind the little purchase decisions that you make over the holidays and spend less money than you can afford to. Make the necessary cuts and ensure you have extra money from your income. If you have no money left over, it means you have to cut off more expenses or step up your income to keep up with your current lifestyle.

Come Up With A Good Payment Plan

Once your budget is in place, you need to make a good loan payment plan. To do this, Find how much you can set aside each month for your debt, then strive always to pay more than the minimum amount.

Paying more than the minimum will reduce your total interest cost, and you’ll become debt-free sooner.

Make Your Presents And Holiday Cards yourself

The holiday season is a time to show our loved ones that we love them by showering them with gifts and other nice things. However, you don’t always have to spend too much when shopping for presents. You can always make your gifts more personal by making them out of readily available materials. After all, a gift made by your hand will be more emotionally fulfilling than an expensive one from a supermarket.

Elite Personal Finance

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