Make a New Year's Resolution to Reduce Credit Card Debt |
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by: Janna Weiss
2008 saw some pretty good Black Friday deals. And last-minute Christmas sales. And post-Christmas sales. You get the picture. If you took advantage of too many good deals this season, you might be suffering from a holiday credit hangover. The bad news is that overspending can impact your finances for many months to come. The good news is that you can make a New Year’s Resolution to cut down on your credit card debt.
Most of us want to build up our wealth for retirement, home-buying, investing, or just to take a nice vacation that the family will enjoy. The problem is that we spend too much of our monthly income on credit card bills. Minimum monthly payments are too low to actually get us ahead. Besides, with so many interest rate hikes, those minimum monthly payments aren’t exactly small anymore.
If you’re paying more than your minimum each month, you’ve already taken the first step toward making your New Year’s Resolution come true. Debt is wealth’s natural enemy, and you have to reduce it before your wealth can flourish.
Experts recommend shopping around for a 0% interest credit card and transferring your existing balances to it. Then, to keep from accumulating more debt, cut up both the old credit card and the new one. Don’t charge any purchases until your balance is paid in full. Even then, reserve your plastic for real emergencies. (Note: department store sales do not qualify as real emergencies).
To keep your debt down all year long, sit down and make a budget that takes into account all of your monthly income and all of your outgoing expenses. Start tracking every purchase you make. You might be surprised how much you spend on conveniences and entertainment. Also, you might be surprised how much you spend on credit card fees and interest. You can try haggling for better terms with your card company, but you might be better off just looking for a new card.
If you’re using plastic to make ends meet, your lifestyle might need an overhaul. But with job markets the way they are, it’s better to reduce your outgoing bills than to rely on increased income. Keep your entertainment budget low – think dollar movies, dollar menus, and the local library – until you’re caught up on your bills and living comfortably within your means.
Some holiday spending sprees leave us in financial tatters for months thereafter. This year, make your finances a priority. Sniff out the best credit card deal, assess your situation like a pro, and keep a tight grip on your wallet. Next year, you might not have to make any credit card purchases at all.
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