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You Overspent on Christmas—Now What?
Write down all of these questions, then answer them thoughtfully and honestly. Seeing your answers in writing will bring a kind of clarity that's necessary to fix the problem.
Let's say that at the last minute you charged new iPods for your kids, and now you're kicking yourself. If you keep kicking, you may never know why you did it. But if you stop long enough to ask, "Why did I buy expensive electronics for the kids when I couldn't afford it?", seeing your answer ("I wanted them to think I was the world's greatest mom and make this a Christmas they'd never forget") can give you perspective and help you think of other ways you could have made the holiday memorable without piling on more debt.
Now, take a deep breath and write down the amount you overspent. Don't hide—just face up to it and decide right now that you will do what you must to repay it.
3 ways to bounce backClearly the only way to put the situation right is to repay the money. And there are a number of ways you can do that. Choose the one that you can live with.
1. QUICK AND EASYWhile aggressive, this is your best option: You'll pay the lowest amount of interest and the problem will be history long before next Christmas. In this scenario you'll repay the total amount in three months. Let's say your debt is ,000. To eliminate it in three months at 16.99% interest, it will take three payments of 5 (total payback with interest, ,028).
However, if you didn't have enough money to pay for Christmas in full, you may not have enough for this aggressive fix. But if you're serious, there are things you can do to make it happen.
Declare a spending freezeStart now and follow through until the money is repaid. That means no unnecessary spending of any kind.None.You may even want to freeze your credit cards (I'm serious about this!) in a block of ice in your freezer. That way you can't get to them and continue to rack up debt. Too tough? Not when you know this is just for three months or until you reach your goal.
Sell thingsTake advantage of eBay or Craigslist.org. Look around and assess all the stuff in your home. Liquidating some of it could benefit you in two ways: raising cash and simplifying your life.
Search for unclaimed fundsThis may sound too good to be true, but somewhere you may have unclaimed cash (also referred to as unclaimed property). These funds can be in the form of forgotten checking or savings accounts, undeliverable tax refunds and insurance payments, or leftover credits from mortgage payoffs or utility services. Every state has millions of dollars in unclaimed funds just waiting for the owners to speak up. Google "unclaimed funds" plus your state to search online. Be sure to check every state where you've lived, under your current name and also your maiden name. Search for your family members, too.
Earn moreIf you can pick up overtime, extra shifts or even a temporary weekend job, do it. You'll have time to relax once the debt is repaid.
2. SLOW AND STEADYIn this scenario you'll repay the amount you overspent in six months, so by summer the problem will be fixed. This method, however, will cost you more in the long run—smaller installments mean you'll pay more interest. In my example, ,000 at 16.99% will pay off in six segments of 5 each (total payback, ,046). To do this, consider the following:
Pick your sacrificeLook seriously at your regular spending. You may not be ready to do a complete spending freeze, but you do need to cut back on eating out, buying little extras for the kids and other nonessential spending. Come up with several ways to sacrifice for six months, then divert that money to paying Christmas debt.
Save on groceriesMake a pledge to buy only sale items. This is such a simple way to lop off at least 20% from your grocery tab. You'll have to give up brand loyalty, but you won't starve. Supermarkets have items on sale in every area of the store, every week. Just be sure to take what you saved on groceries and use it to pay down your debt.
Caution:By spreading your payback over six months, you run the risk of becoming complacent. The temptation will be to push it to seven months, then a year…and before you know it, you will have moved into the next category.
3. LONG AND PAINFULThis is your worst nightmare. In this scenario you put that additional ,000 on your credit card and decide to just live with it, making minimum monthly payments. I hope you're sitting down. At 16.99% interest, a minimum payment and typical credit card terms, you'll still be paying for your mistake in 2019. I'm not kidding! It will take you nine and a half years to pay back ,000—and it will cost you 7 in interest on top of the money you overspent. The payback will still be going on next Christmas, and the next, and every Christmas for the next decade.
Prevent it next timeWhile paying back the money as quickly as possible is important, it's even more important that you take steps right now to prevent this from happening again. Once you know why you overspent, ask yourself what you should have done differently. Here are some excellent ideas.
Start earlierI know from personal experience that procrastination is not my friend. The longer I wait, the greater the sense of urgency (also known as panic) and the more I'll spend. An easy way to start earlier is to designate a closet or other place for gifts. This tunes you in to looking for sales or special items throughout the year.
Now that you have a place to put everything, want to get even more strategic? Divide your Christmas list by 11, and determine to purchase or make that number of gifts each month starting now.
Stick to a budgetThis is a lot easier if you approach Christmas with cash—no plastic allowed. Forget fancy budgeting software or complicated spreadsheets. Instead, grab a stack of envelopes. Write a name (Sally) or item (Christmas tree) or event (concert) on the front. Add the dollar figure you intend to spend. Place that amount of cash in each one. When the envelope is empty, you know you're done. Keep the receipts in the specific envelope and you'll have a dandy filing system already in place.
Reduce the number of giftsNow's a good time to re-evaluate things. Does everyone on your list need a gift? How many gifts do the kids really need? One idea shared by several readers is to implement the three-gift family plan and make a big deal of it. The idea is that each child receives three gifts, reminiscent of the three gifts given by the Magi to the Christ Child. Or allow kids to ask for only one thing from Santa (it may take them weeks to narrow it down, so announce this early). Now the other two gifts become bonuses, because the kids didn't even ask for them.
Set up a special accountRemember the old Christmas Clubs at banks? You'd open an account and tell the bank how much you wanted transferred to it from your paycheck each week. Twenty-five dollars a week translated to ,250 for Christmas shopping. The best part? It was painless. You didn't miss money you never saw. These accounts have pretty much disappeared since credit cards became plentiful, but you can create your own. And you should. Go to your bank, open a special account that has no minimum or fees, and fill out an automatic deposit authorization form.
I doubt if any of us will reach the level of perfection where we never make any financial mistakes. But I can tell you from my own experience that these mistakes can become fewer and farther between, even at the holidays.
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