If you went a little overboard this holiday season, you are not alone. Countless families claim to have spent too much on the holidays, with CNBC reporting that 74% of Americans admit they didn’t budget properly. With the average family racking up approximately $1,054.00 of debt, it is important that they get out of that hole quickly in order to start the new year in a strong financial position. These 5 simple tips can help:
1.) Understand what you have and what you owe.
Before you can tackle your debt, you need to determine what your income is, what your spending habits are, and then develop a plan to help get your finances in check. By breaking down what you bring in (and what you send out) each month, you will know exactly what you need to live on, and what extras you should cut.
2.) Decide how you are going to pay down your bills.
There are two main ways people choose to take on credit card debt: the snowball method and the avalanche method. The snowball method is where you pay off the smallest debt you have (regardless of interest rate), taking that amount and rolling it off to pay the next highest debt until you have it all paid. The avalanche method is essentially the same, except you tackle the debt with the highest interest rate first. Both are highly effective ways to bring your credit card balances down to zero.
3.) Make some big changes to your habits.
Whether it be foregoing a larger home and opting to keep your excess belongings in a nearby self-storage unit, clipping grocery coupons, or eliminating some streaming services, finding ways to limit your expenses is key to cultivating wealth. If you can’t afford it you shouldn’t buy it, and quite frankly, in the words of financial guru Suze Orman, “Just because you can afford it doesn’t mean you should buy it.” Be wise with what you have.
4.) Consider a side hustle to earn some extra cash.
If you have any used books, DVDs, CDs (however ancient), or electronics lying around, you can create an Amazon or eBay account and sell them. Countless people have become so successful doing this, they tackle local garage sales and thrift stores each weekend, keeping inventory within a local self-storage unit. Other options to consider are renting your home out as an Airbnb (storing important documents and valuables in a storage unit), or ridesharing and delivery for companies such as Favor, Uber, Lyft, DoorDash, and Instacart.
5.) Create a holiday spending plan for next year.
When the holidays approach next year, determine what it is you can actually spend, generating a list of gifts you intend to purchase (as well as the cost) so you can make adjustments as needed. Being proactive by setting (and sticking to) a “gift plan” is important to help ensure this doesn’t happen again year after year, maintaining your financial strength.
Finances are everyday stressors for millions of Americans. Make this year different by knowing your financial situation, devising a plan, and earning a little extra. Set yourself a budget and stick to it – being proactive concerning next year. With a little extra work and some changes to your habits, you will be on your way to a better financial position in no time. Here’s to making 2021 a year of prosperity and growth!
“I believe that through knowledge and discipline, financial peace is possible for all of us.” -Dave Ramsey