Are you dealing with holiday debt?

The holidays are over and the new year has begun. This is the traditional time of year to make our new year’s resolutions. From a daily money manager’s perspective, resolutions might include creating an emergency fund, automating routine bill payments, improving your credit score, and/or updating your estate documents.

Many of us start the new year with high hopes and expectations, and compile long lists of resolutions that prove too ambitious and, ultimately, unrealistic. By the end of January, our well-intentioned plans for the new year have fallen flat. I recommend a more focused approach and one that will help achieve financial success and peace of mind.

Are you dealing with holiday debt? Are you experiencing anxiety opening your credit card statements and realizing how much you spent for holiday gifts? Three out of ten shoppers started this past holiday season still carrying debt from the prior year. If this is an issue, you have time to address this issue and then plan for next year’s holiday season:​

1. List all of your debts, excluding your home mortgage and automobile loans.
2. Analyze your monthly cash flow, documenting all money coming in and all expenses going out. Brainstorm for ways to increase money coming in and decrease money going out. Ask yourself if each expense is a “need” or a “want.”
3. From this analysis, prepare a monthly budget, a spending and savings plan.
4. Direct any surplus money to paying down your debt. Pay the minimum balance on all your loans except the one charging the highest interest rate. Direct any extra money towards paying off this debt.
5. Repeat this plan and pay off your debt one loan at a time until all your credit card debt is paid off.
6. Prepare a 2019 holiday budget and start to save for holiday gifts as part of your monthly budget. This is similar to the old Christmas account when people opened a separate bank account for their holiday purchases and saved throughout the year. You will have money on hand when the 2019 holiday shopping season starts, enjoy a more stress-free holiday season and eliminate the holiday hangover.

The most important part of the holidays is spending time with family and friends, and the gift of your presence is more important than any gift you buy.

Beth Carroll is a CPA and a daily money manager. Her company, Cornerstone Money Management, LLC, helps seniors in their homes with billpay, financial organization and cash flow management. You may reach her at beth@cornerstonemoneymgmt.com or 401-323-4895.