By now you are well into the new year. You’ve made (and hopefully not broken) your New Year’s Resolutions, learned a few tricks to maximize your tax refund, and came into the new year ready to have a better financial year than the last. But what about those holiday credit card bills that just arrived in the mail. It may have been fun while you were shopping, but if you want a fresh start to your finances you will have to conquer your holiday debt.
Here are four tips to help you manage your holiday credit card bills:
Know Your Total Debt
Before you can start, you should know the total amount of debt you are dealing with. Instead of pulling out all of your receipts or bills, you can save yourself serious time by using online tools like Mint to figure out your total debt.
Pay Your Credit Card Debt Down As Soon As Possible
Your W-2s should be in the mail or you may have access to them already. This is the perfect time to go online and e-file your taxes with direct deposit so you can get your tax refund as soon as possible. The sooner you receive your tax refund the sooner you will be able to pay down your debt avoiding additional interest charges. About 75% of taxpayers received a tax refund of close to $2,800 last tax season so there’s no reason to wait.
Use the Debt Snowball Method
If you fell prey to the cashier telling you, “you can receive 10% off your total purchase if you open a credit card today”, and you opened a credit card at almost every store you shopped in, you may be feeling a little overwhelmed now. Sound familiar? Well, don’t worry. The Debt Snowball Method really works.
In case you’re not familiar with it, here’s what you do:
- List all of your non mortgage debts from the smallest balance to largest
- Pay the minimum payment on every debt
- Figure out how much extra you can put towards paying off your debt
- Use that money to pay down the one with the smallest balance
- When that is paid off, roll over that money into the next debt (old amount +minimum)
- Repeat and keeping rolling over payments until all your debts are gone
Cut Unnecessary Expenses
You would be surprised how much money you can find just by cutting everyday living expenses. By everyday, I mean some things you spend money on every day that you absolutely do not need and some additional expenses that you may not be aware of that are incidental to necessities. If you just cut out that specialty frappuccino three days a week that’s about $60 additional dollars per month that can be paid against one of your credit card bills. Now there are those everyday expenses I was talking about that are necessary like utilities, the phone, car insurance, but if you really pay attention to your bills you probably are paying some additional fees for things you don’t need.
Hopefully these tips will help you conquer your holiday debt. You can get a jump start by going online and filing your taxes to get closer to your tax refund. You may be able to get even bigger savings by filing absolutely free.