When the holidays are near, they bring a lot of excitement. Your calendar gets filled up with friendly celebrations and family gatherings with lots of decorations to put out, food to share and gifts to give. Malls are packed and stores are fully stocked for plentiful shopping for all. The season for giving can be fun and heartwarming, however the repercussions of such lavish spending can also have a negative impact on your finances.
Most people don’t prepare well financially for the holiday expenditure and typically tend to use their high interest credit cards; the pay now and deal with it later option. If you don’t plan ahead for the extra spending that will take place toward the end of the year, just before the holidays, you will start the New Year with higher monthly payments on your credit card bills that you may not be able to afford.
So How Do You Break Free From This Neverending Yearly Cycle?
You can learn how to control your spending by creating a plan ahead of time. Budgeting your holiday shopping along with managing your finances throughout the year will alleviate the hardship that may follow after the season is over.
A credit card is simply credit that is given to you without collateral. Which means that if you cannot or do not pay on time, you run the risk of negatively impacting your credit score as well as paying high late fees for unpaid bills. And of course with high interest rates you will end up paying up to three times the amount you borrowed.
When there is no collateral behind a credit given, lenders can sue a borrower for an unpaid balance and some will even resort to garnishment. These are the types of things you want to avoid by making better choices during the holiday season. There are many ways to prevent these things from happening, however you have to be diligent in your planning.
Financial Planning for the Year Ahead
The holidays can often leave us with financial strain, but proper planning can help you avoid overspending and manage your finances more effectively. Here are some actionable steps to prepare financially for the next year:
1. Review Your Spending Habits
Take a close look at your past spending habits, particularly during the months of November and December.
- Analyze Receipts: Calculate your total spending by reviewing receipts from previous years.
- Check Credit Card Statements: Review your credit card history to find your average monthly holiday spending.
This will give you a clearer idea of how much you typically spend during the holiday season.
2. Compare Spending vs. Income
Once you understand your spending patterns, compare them with your income.
- Determine what you can realistically afford
- Set clear spending limits to stay within your means
Understanding your financial boundaries is the first step toward creating a budget.
3. Create a Holiday Budget
Use your average spending data from past years to build a realistic holiday budget.
- Assess Affordability: Reflect on your monthly credit card payments from previous holiday spending.
- Adjust Accordingly: If past payments were unaffordable, lower your budget for the upcoming year.
This step helps you avoid unnecessary debt and manage your expenses more effectively.
4. Start a Holiday Savings Plan
With a budget in mind, begin saving for the next holiday season.
- Split the Cost: If your holiday budget is $2,000, aim to pay half with cash and half with credit.
- Set Monthly Savings Goals: Save $100 per month for ten months to reach $1,000 in cash savings by November.
Saving incrementally reduces reliance on credit cards and eases financial pressure.
5. Prioritize Cash Over Credit
Whenever possible, prioritize using cash over credit cards for holiday spending.
- Double your monthly savings if you want to avoid using credit cards altogether.
- Having more cash on hand means less stress and fewer post-holiday financial burdens.
6. Educate Yourself on Financial Literacy
Understanding the basics of financial literacy can help you make better decisions and avoid future debt traps. Learn about budgeting, savings strategies, and debt management to build long-term financial stability.
What If You’re Already Struggling with Debt?
If you’re already facing high credit card bills from overspending this year or previous years, don’t panic. There are options to help you clear your debt and start fresh:
- Debt Settlement: Negotiate with lenders to pay off debt for less than you owe.
- Debt Consolidation: Combine multiple debts into one manageable monthly payment.
- Credit Counseling: Work with a professional to create a personalized debt repayment plan.
By following these steps, you can enjoy a festive holiday season without the financial stress. Plan wisely, stick to your budget, and prioritize financial health to avoid hardship in the aftermath. Generosity and celebration should not come at the cost of long-term financial strain.
The Best Options for Clearing Your Debt
- Credit Card Debt Consolidation: This is when all of your credit card balances are combined into one new loan, with a possible lower interest rate and one lower monthly payment. This can be a beneficial option if you have more than one credit card and if you are still currently making payments for each one on time. Keep in mind that this option does require you to get a larger lump-sum loan to be able to combine all of your credit card debts.
- Credit Card Debt Settlement: This is when you have outstanding balances or the account is in collections. The monthly payments are no longer affordable for you and your account drafts may be resulting in insufficient funds. Debt settlement is the best option for this situation. Firstly, so that your lenders can immediately stop drafting your account and collectors can stop harassing you. Secondly so that you can now work to find a lower and more comfortable combined monthly payment. Once you have enough funds saved up you can then settle your debts.
Take Control of Your Debt with Encompass Recovery Group
The holidays should be a time to enjoy with friends and family, not a source of financial stress. Overspending during this season can lead to a cycle of mounting debt that feels impossible to escape. That’s where Encompass Recovery Group can help.
By working with a professional debt settlement company like Encompass Recovery Group, you take the guesswork out of resolving your debt. Their team of experienced debt relief specialists has the tools, knowledge, and expertise needed to help you break free from the burden of unsecured debt, including payday loans, credit card debt, cash advances, and personal loans.
Take the first step today. Learn more about how Encompass Recovery Group can help you start planning for a debt-free holiday season next year. Contact us to get qualified and take back control of your finances!