Holiday Debt And How To Tackle Them Early On

holiday debtAt the start of the year, there is a big chance that you are thinking about holiday debt you incurred during that frantic celebration week. From gift giving to parties and even last minute travels, the holidays could have set you back in your budget. As a result, your first financial challenge for the year is overcoming that debt.

It might be a little disappointing because you are trying to get ahead at the start of the year. However, the debt you incurred is pulling you down and bringing you in a different direction. Rather than think of strengthening your finances, you are too preoccupied with thinking of ways to pay down your huge debt amount.

Americans added over $1,000 in credit card debt over the holidays according to CNBC. That is a big amount to overcome especially if it is not included in the budget. There are people who might be able to pay that holiday debt in a month or two. However, the reality is that a lot more consumers would have to pay for it for for a longer time.

This is one of the downsides of holiday expenses that went unguarded. As you enjoy the time with family and friends, you might have lost track of your budget. It is possible that you had one to start with but along the way, you just got into the moment and started buying gifts for everyone you know. You could have booked a last minute travel just to be with family and other people close to you.

These and a lot more could have resulted in accruing a lot of debt over the holidays. That being said, here are a few things you can do to get over that financial hump.

Review your holiday debt

Calculating The Household BudgetNow that you are looking at that mountain of debt you got over the holidays, the first thing you need is to review your expenses over the holidays. If the debt you accrued is all on your credit card, you can check your statements as well as the receipts you have for all your purchase. It would be better if you can list them all down so you have a working list.

Next thing you need to do is totally all of them and check if you come to that same total as your debt amount. At this point, it is a smart move to check each and every expense item. What you are looking for are anomalous transactions if any. Also, try to identify impulsive purchases that you made over the course of the holidays. It can help you identify your triggers such as sale promos or even seeing the same item from friends and family. This will help you avoid the same things the next time the holidays come around.

Have a concrete household budget

Once you verify the purchases that led to your holiday debt, the next thing you need to focus on would be your household budget. You need to have an idea what your financial capability is when it comes to paying off debt from the holidays. It is important that you know where you stand financially so you can pay off your debt.

Analyzing your household budget is a pretty straightforward process. You just have to factor in all your sources of income. Next is making a list of all your expenses that you have to attend to month on month. Much like your income, this needs to include all your expenses. From basic needs big-ticket debt payments, you have to include everything.

Start looking for a debt payment strategy

As soon as you have a clear picture of both the debt amount you owe and what you have in your budget, it is time to start thinking about a repayment plan. There are a number of payment strategies you can use to directly address holiday debt. Each of them has their own financial advantages and disadvantages.

One of the payment strategies is the so-called avalanche method where you set your sights on the accounts with the highest interest rate. This is meant to help you save interest payment in the long run. Another strategy is the snowball method where you set your sights on the accounts with the lowest payment amount. This strategy gives you mental wins that encourages you to pay off more debt items in your budget.

One other payment strategy you can look into is debt consolidation. From the name itself, the strategy involves combining your debt payments under one account. For one, it helps you manage your debt payments better. Once you combine your payments, you get to focus on much fewer details and lower the chances of overlooking payment due dates. You can also enjoy the benefit of lowering your monthly payments due to a higher credit score or longer payment period.

Widen the gap between income and expenses

When you start talking about debt payment, your budget plays a big role in determining how you pay it off. One thing you need to remember is that the wider the gap between your income and expense with your income on top, the better off you would be. This would give you more room in your finances and allow you to make extra payments towards your holiday debt.

The most common thing people do is to lower down their expenses. After you have put together your budget, you still need to conduct a thorough review, especially on your expense side. What you need to look for are areas to cut down further. The more expenses you free up, the more you have to double down on debt payments.

Another strategy that a lot of people prefer is looking for ways to increase their income. Traditionally, this used to involve taking on a second job. Something they can do after their day job such as bartending, waiting tables or even pulling double shifts at work. There are those that choose to take on online jobs to earn more money. Others prefer to earn from their hobbies which allows them to earn good money doing something they are passionate about.

Plan for the holidays early on

One of the most effective strategies to address holiday debt is to prepare for it early on. Now that you have an idea how much debt can set you back at the start of the year, you can choose to be proactive for this year. One of the best ways to do that is to make preparations so you do not go through the same mistakes once the holidays come around.

For one, you need to list down all the people that you gave gifts to during the last holiday. This will allow you to assess the overall picture. Next is planning early on what to give them and saving up for that expense. Putting aside a small portion every month is better than stressing out where to get a large amount come the holidays.

Holiday debt carryovers to the new year mostly because you were not able to plan for your expenses early on. It is still at the end of the year but if you plan on it early enough, you can enjoy the holidays without having to lose sleep over your debt payments.

Effective Debt Payment Strategies For The Year

Effective Debt Payment Strategies For The YearAs the new year dawns on us, one of the best ways to manage your finances is to look at effective debt payment strategies. You can simply choose to keep on paying the minimum on your financial obligations and that is fine. At the very least, it will keep you current. However, if you want to have better control over your finances, you need to re-think that strategy.

For one, you would end up paying a considerable sum on interest alone. Minimum payments tend to have interest fees tucked in on the amount. You also have to look at penalties and other related fees if you do not pay amounts in full. Overall, minimum payments can be easy in the pocket but can cost you a lot over time because of interest and fees.

One positive thing you have going is that your payment gets reported in your credit score. That is if you are making on-time payments. Late minimum payments will not only stain your credit report, it can also lead to a lot more penalties and fees than what you are dealing with at present. As a result, you pay more and your score dips.

These are just some of the reasons why you might want to look into effective debt payment strategies to manage your finances. It would be a great start for the year as you use strategies that can get you out of debt faster. The sooner you can do that, the more funds you can put into your future financial needs. That being said, here are a few things to go over to help you identify an effective strategy for debt payment.

Audit your debt obligations

On top of your list should always be an audit of your debt obligations. It is an important first step so you know what you are facing. This step is easy and straightforward because you just list down all your debt payments. From your mortgage loan to car loan, student loans, as well as your credit card payments. You need to be able to list all of them down.

The challenge starts when you are in debt denial with some of your financial obligations. It can be that one credit card that has already been maxed out. It might also be a payday loan you are trying to avoid. As you list down all your debt obligations, you need to be very honest with yourself and be truthful on what you put on the list. Only then will you be able to see the whole picture and look at effective debt payment strategies.

Tackle high-interest debt payments first

One effective strategy to pay off debt is focusing on the accounts with the highest interest rate. Sometimes referred to as the “Avalanche” or “Debt Stacking” method, this helps you save on interest payment down the road. This usually comes out to be your credit cards or other unsecured loans that you have taken out.

Take note that you still need to keep paying all your other debt obligations. You can put in a minimum amount on all while putting a little extra to that one payment with the highest interest rate. Once you have paid off one, you set your sights on the next highest rate and then the next one until you have paid off all your debt obligations.

Prioritize paying off smaller debt amount

When you start talking about effective debt payment strategies, you can also consider the “Snowball” approach which can fast track debt payments. Much like debt stacking, the priority this time are the ones with lowest total amount regardless of interest rate. As you finish one account, you simply add what you were paying for it to the second smallest payment. As you do this, you get to pay off your obligations one after the other.

What this debt payment strategy gives you are small mental wins that you can take to the next one. There is a certain feeling of accomplishment when you pay off any type of debt. It gets you excited to pay off the next one and the one after that. Soon you would have paid everything because you were getting those small wins at the beginning.

Debt consolidation

With the two options above, you still have to keep an eye out for each and every one of your debt accounts. Missing one could lead to bigger debt payments at the end of the month. If you have the ability to meet your payments but you are just struggling with keeping up with the payment schedule, you need to consider consolidating your debt.

This is one of the effective debt payment strategies that a lot of people have been using. As the name suggests, this will entail combining most, if not all of your debt obligations under one account. If you have five different credit cards with various lenders, you are juggling multiple payment details. From the due date to the payment amount and even interest rate.

Once you combine your debts into one account, you will only have to manage a few payment details. As you do that, you lessen the chances of missing a payment. In the process, you reduce the possibility of paying unnecessary fees and penalties. You can also lower your monthly payments either with a higher credit score or even by stretching the payment timeframe longer.

Analyze your debt problem

When you start to look at effective debt payment strategies, you might be tempted to just look at how you can pay it back. After all, that is the end goal. However, you can quickly get back in debt if you do not analyze the problem. Paying off financial obligations could simply be treating the symptom and not addressing the cause.

You might be able to pay off your credit card debt you accrued because of uncontrolled shopping. Value Penguin even shares that balance-carrying households have an average of over $16,000 in card debt. But sooner or later, you will be in debt again if you do not change your shopping ways. As you pay off your debts, you need to make sure that you keep your impulsive buying behavior in check as well. It will turn into an endless cycle of payment if you add debt just as fast as you pay them off.

When you pay off your financial obligations, it will be a big help if you understand why you got into that position in the first place. Is it because of impulsive shopping, an unexpected emergency, or even a medical need? As you identify the reason why, you stand a better chance of protecting your budget. This will help ensure that you keep debt at bay and protect your finances as well.

There are a number of effective debt payment strategies out there to help you address your debt problems. They can give you the chance to save on interest payment or even give you small wins to keep you going. Debt consolidation can also give you the peace of mind where you simply have to focus on one set of payment details every month. If you get to enroll it in automatic debit, you get to enjoy the freedom of checking in every month and be able to set your sights on more important things in life.

Tips To Address Financial Burnout Before The Year Ends

Tips To Address Financial Burnout Before The Year EndsFinancial burnout is one situation you wouldn’t want to be in the middle of as the year comes to a close. But the reality is that there are quite a number of consumers who feel this way as they start to take account of their finances. They feel that they are in the middle of a personal crisis and simply start to feel the weight of that on their shoulders.

This is a hard place to be in and could send you down into a tailspin to debt. Not to mention that there are situations that adds stress to your finances. There are a few signs of burnout that you need to look out for. One is being in a constant state of physical exhaustion. You could feel fatigued, appetite loss, and even getting sick all the time. Apart from physical signs, it can also manifest emotionally.

Financial burnout can also be preceded by loss of emotional control. This is where you might experience an unexplainable mood swing. You could be happy one minute then sad and frustrated and even angry the next. One severe sign of burnout is depression where you don’t see the point in all the things you do in life.

These symptoms further underscore the importance of addressing burnout as soon as you recognize the signs. If left on its own, it can develop into something more serious. When this happens, treating it could take a lot longer time than it should. If you are experiencing it this close to the holidays, here are a few things to consider to help you get back up on your feet.

Look for an underlying reason

There is a possibility that financial burnout could simply be triggered by a more serious problem. That being said, it is important to look for this trigger. This sound pretty simple but the process can differ from one person to the other. The time it will take to get to the answer could be quick and short for some while it could take a lot longer time for others. Remember that as Bloomberg shared, the top three stress triggers for Americans are money, work, and the economy.

This means that it is best to get started with it as soon as possible. The sooner you try and identify the reason for your burnout, the faster you can correct it. Some of the underlying reasons could stem from broken relationships at home, stressors at work, or even substance abuse. Once you understand what is causing your money burnout, address them at the soonest possible time.

Audit your expenses

Taking a look at your expenses might give you an idea on what is causing your burnout. A good place to start would be your household budget. You should be able to quickly have an overview of your expenses and pinpoint friction points in that list. These are the ones that are giving you the most problems such as high credit card payments or high-interest rates.

Once you identify these friction points, look for ways to lower down the amount of money flowing out of your budget. One idea is to adapt a frugal lifestyle. This is where you try and live under your budget. This way, you get to save a few extra dollars every week or month. At the same time, you also develop the habit of managing your income better.

Increase your take-home income

stack of moneyOne of the things you can do to help you deal with financial burnout is to try and look for ways to increase your income. Of course, this will be most effective if you find yourself in a situation where you try your best to make ends meet. Living on a shoestring budget and being scared of the bills that come due at the end of the month can bring you stress.

Of course, you need to make sure that you are burned out not because of too much work. This is because increasing your income would require a lot more effort from you. You might end far worse from before if you look for another job when you are already trying to hold on to 2 jobs already. Learning a new skill you can earn off from, looking for passive income, or simply working smarter might help you put in additional income in your budget.

Stop comparing yourself with other people

Otherwise referred to as trying to keep up with the Joneses, you need to stop comparing yourself to other people. Just because your officemate went on a trip with his whole family means you have to do the same. Also, you do not have to get a new car at the dealership because your neighbor just drove up a new one on their driveway.

You need to make sure that you stick to your own financial targets and goals. Your officemate might have been saving for that trip with his family for a year. Or that new car up on your neighbor’s driveway could still be on installment for the next few years. Stick to your plans and be happy with the success of other people.

Consolidate your debt payments

One of the reasons why you could be having a financial burnout is having a tough time managing your debt payments. You could be juggling multiple credit cards and the multiple payments that come with it. Over time, you might overlook some of them and add up unnecessary charges and penalties on the succeeding statements. This, in turn, will make you pay more than you should.

Consolidating your debt can give you an easier time managing your payments. Rather than trying to juggle multiple debt payments every month, you only have to worry about one payment for most, if not all your debt obligations. You do not have to keep tabs on multiple payment amounts spread across different dates in any given month. It will now just be one due date for one amount and for one interest rate.

Set realistic goals

There are times when the stress comes from unmet expectations and this can be the result of unrealistic goals. Take for example your retirement savings. You might be pushing yourself to set aside huge amounts every month when you can only really save much lower than that. What happens is that other areas of your finances start to be affected.

You need to identify realistic goals so you do not put any additional and unnecessary strain on your finances. If you need to dial down your targets just to give you a little more breathing room then do so. You can simply find ways to increase your income in the coming new year. When that happens, you can now allocate more to your financial goals.

There are signs that you are already suffering from financial burnout but there are ways to address them as well. After acknowledging the problem, you need to start working on it especially as the holidays are just a few weeks away. It is best to end the year on a high and positive note rather than from a gloomy and dark place. It will also help you start the new year right.

Is It A Good Idea To Consolidate Debt Towards The End Of The Year?

consolidate debtAs the year starts to close, you might be wondering if it is still a good idea to consolidate debts. Is it better to simply wait at the start of the year or do it now? Are there benefits if you postpone it for next year or is it the same if you start with it before the year comes to a close? These are just some of the questions you could be asking about debt consolidation.

This can be a common question for people who are neck-deep in debt and just wants to manage their payments. It is quite frustrating to try and keep up with multiple payments every single month. Debt consolidation is a great repayment program but you need to know if it is the most appropriate solution to your financial need.

Why will you consolidate debt

As you try and explore this program and think about using it, you need to understand the program in relation to your current financial situation. Though it is one of the most sought-after repayment programs by consumers, it is still not a solution for all your problems. This is important because consumers are racking up high debt amounts again. According to Washington Post, credit card debt in June this year breached the $1 trillion mark. Here are some instances when debt consolidation could work in your favor.

You want to take control of your monthly payments

If you are trying to juggle multiple credit card payments and you are already losing track of some of them, consolidating your debts could be a lifesaver. It will help you keep track of your payments. This is because you put everything under one card where you only have to worry about a single payment on one due date every month.

Another advantage this brings is that you do not run the risk of overlooking payment due dates.  This is because the more payments you have to worry about, the higher the chances that you could miss one of them. This is actually one of the problems brought about by having many credit cards. There are consumers who are able to manage multiple credit cards. But once they start to pile up and the payments seem more than you can handle, it would be a good idea to consolidate debt and put them on one account.

You want to take advantage of lower payment

If one of your credit cards offers low to even zero percent interest rate, it is a good idea to consider using that to consolidate your debt payments. For one, you get to save a lot on interest payment. That is a great boost to your finances towards the end of the year. Rather than the money going to interest payment, you are able to save it for the holiday expenses.

One thing you need to be careful though when deciding to consolidate debt onto a new card with 0% interest rate is the timeline. More often than not, you might think that the payments will be the same forever. However, these are usually introductory offers by card lenders and has an expiration date. After that, regular interest kicks in.

You are expecting extra money before the year ends

lady putting money in a walletThere are times when the end of the year means a big boost to your finances. It can come from bonuses at work or even an increase in demand for your side hustle job. It is also possible that you are expecting a pick-up in your sales due to the holidays for your business. These are some of the possible sources of unexpected money before the year comes to a close.

With these in mind, you can choose to go into debt consolidation so you can pay off a significant amount on your debt obligations. As they now are all under one account, it is easier to pay them down all in one go. This is easier rather than tallying up all your debt payments and trying to equally make payments to all of them.

Do not consolidate your debts for these reasons

As much as debt consolidation is a great program, it is not for everyone. Now that you have an idea on the types of situations where it is to your benefit to consolidate debt, here are a few instances when you should think twice about it.

You just need to free up your card to shop for the holidays

The holidays are fast approaching and there is no question that this is one of the most expensive times of the year. In fact, according to the The National Retail Foundation, 2016 saw about $655.8 billion sales and expected to increase this year. That being said, you might already be looking for ways to pull resources together to buy everything you need.

If you want to consolidate your debts just so you can free up your credit cards would land you in a heap of trouble. For one, you are operating on a false sense of available financial capability. You only have an available credit on that one card because you transferred the balance to another card. One way to understand this better is using your two hands.

Say you have one ball each on both of your hands but you want another ball. What you do is put one of the balls into the other hand to free up one hand. Once you get another ball in your free hand, you now have three balls. Now think of those balls as debt obligations – you only moved them around so you can borrow more. This approach can put you in debt real soon.

You want to take advantage of credit card rewards

Chasing your credit card rewards is never a good idea. At the most, your rewards and perks should only enhance your budgeted expenses. You assign the cards to specific expenses to maximize rewards. Once you start purchasing just to earn points then you are hooked. You are no longer looking at what you are buying and you are simply focused on the total amount. If this is you, choosing to consolidate debt to free up your cards can spell trouble.

You just want to show off

This is one of those instances where you simply want keep up with people around you and show that you can also purchase the things they buy. It can be a lot harder now that people are going to be buying items left and right. In your bid to keep up and maintain a front of having a lot of disposable income, you end up consolidating credit card debt to use some cards for shopping. Needless to say, you will be facing a big monthly statement at the end of the month and could be in big debt because of this.

There is never a bad time to consolidate debt, just bad intentions and if you feel you can benefit from combining your debt obligations before the year ends, then do so. If you are going into debt consolidation just to free up some of your cards for shopping, then you should rethink your financial strategy. That is a sure way of ending the year in the red.

Retirement Regrets A Lot Of People Have In Common

Retirement Regrets A Lot Of People Have In CommonThere are a couple of retirement regrets that the older generation seems to have in common. The sad part is that the most that they can do is to reminisce about the time and wish they can go back to their younger years. This is because if given the chance, they would make some changes to make their golden years a little better.

For one thing, it is best to accept the fact that retirement is one stop everyone would have to make at some point in their lives. There are those that have the ability to retire early while some wait out the average retirement age of 63 years old before leaving the corporate world. For others, they linger on a little longer than most of a host of reasons. Gallup shares some Americans expect to retire no earlier than 66 years old.

These people that choose to work longer years could still be trying to add on to their nest egg. For some, they simply cannot imagine waking up one day and not report for work. These are the ones that have been in the same company for most of their life. There are times as well that they simply love their job.

It is a part of everyone’s journey in life and as such, it is wise to take a look at the most common retirement regrets some older people have. It could help the younger generation plan their retirement journey better. Here are some of those regrets that have some of the retirees bothered and wishing they could go back in time and rectify.

Work on the things they have control over

Retirement planning can be stressful for a lot of people and this stress is quite difficult to deal with. When left unmanaged, mental stress can manifest itself and ripple out to physical problems such as poor health. It is helpful to note that at times, stress is simply trying to gain an upper hand on the things that are beyond your control. This is one of the retirement regrets older people have as they have spent a lot of time trying to work on the things they cannot control.

Being shown the pink slip at work is really stressful but rather than spend a lot of energy thinking about the situation, it would be best for you to move forward. Look for a new job or you can even start building up your side hustle. CNBC shares that almost half of the millennials have not started saving for retirement. This is something that they have control over and should be a focus at an early age.

Setting up their reserve fund

There is no way to know what will happen tomorrow much more avoid them. However, just like having to focus on the things you can control – you can prepare for emergencies to reduce its effects on your finances. You might be on track with retirement planning but unexpected situations can affect your nest egg.

You might encounter a medical emergency at one point or even forced into retirement early. There could also be instances when an immediate family would need financial help. These and other things can force your hand into dipping in your fund. This is one of the biggest retirement regrets older people have. Making that move could deflate their fund and they lost potential earnings as well.

This is why it is important to have an emergency fund that is ready to take over any and all financial emergencies you might have. Apart from helping you address the financial need without getting into debt, it helps protect the integrity of your other fund including your retirement nest egg.

Here is a short video to help you understand your emergency fund better:

Decluttering before retirement

There is no question how decluttering can improve finances and even retirees know about this. Their only regret in this matter is not doing it early enough. There are some who believes they will only have time to declutter or even to downsize their house once they are fully retired. They even see it as one of the first things they would do once they hit retirement.

However, the benefits of doing it earlier seem to outweigh the time element. It might need more effort in doing it pre-retirement but it is worth it. For one, the money they can raise in selling things they no longer need can earn interest over time. The same goes with downsizing their home especially if they are already managing an empty nest.

There are a lot of benefits of joining the tiny house movement. As you get older, your place is easier to maintain and clean up. Taxes and insurance would most likely be lower compared to a bigger home. As you sell your big house for a small one, there is a big chance that you get to earn a considerable amount from the sale. You can include that amount in your nest egg early on so it can earn interest.

Passive debt payments

There are instances when people just go with the flow and simply follow their payment schedule. After all, this is the bare minimum that they have to do to stay afloat. However, this can be a disadvantage when they are a few years out from retirement. For one, there is a big possibility that they bring these payments over to retirement which can eat up on their nest egg.

This is why it is a good idea to be aggressive with debt payment leading up to retirement age. This helps increase the available funds they can use when they reach retirement. Rather than setting aside money for payments, they can use it to chase their hobbies or even travel around visiting family and friends. One idea to consider is to consolidate debts to help focus on one payment and be able to pay it down more aggressively.

Overlooking the personal side of retirement

Retirement Regrets A Lot Of People Have In CommonThis is one of the biggest retirement regrets a lot of older people have in common. It is a fact that a lot of them focused most of their efforts on the financial side of it. As they did that, they overlooked the need for lifestyle planning to prepare them for retirement. Retirement was always about the money they needed but they forgot what they want to do in retirement.

It is quite hard to look for a new meaning and purpose to life at old age. It is even harder when everything they have done has revolved around the one thing they are about to leave behind. This is why some retirees wish they can go back and put in a transition stage in their life leading up to retirement. Lifestyle planning means that they put in a structure for their foreseen day to day activity once they retire. It can be easing into a hobby, starting to volunteer in centers or even starting a home-based business. As they plan early for this, retirement now seems to be a lot more enjoyable now that they have an idea what they will do.

Aversion to technology

One thing that most retirees struggle with is keeping up with technology. Some of them might be intimidated with how tablets work or fail to maximize the potential of their smartphones. They are used to perform the most basic functions such as calling or sending out SMS. All the while, they miss out in connecting with family and friends by ignoring social media platforms. It is a good idea for near-retirees to start getting used to technology and applying the same to make retirement a little more fun.

There are a number of retirement regrets that old people wish they can correct. Though impossible to go back in time, their experiences can help younger generations make better and informed retirement decisions.