The holidays are officially over, but the rippling negative effects of all that spending are still felt in your bank account and credit report. Moving into the new year, you will likely want to get your finances back in order so things can return to normal, and you can reach your monetary goals for 2016.
According to CNBC, many individuals tend to take on a great deal of debt during the holiday season, and the stable economic environment may have contributed to more liberal spending this year.
"People go pretty far off track," said David Lyon, the CEO of Main Street Financial, to CNBC. "As the economy is improving, consumers have a greater sense of security around their jobs, and that tends to lend itself to people taking on debt."
If you were one of the individuals who let spending money on presents, travel and food get a bit out of hand, follow these steps to help you cure your holiday financial hangover:
Stop unnecessary spending
One of the first things you will need to do when you start improving your financial situation after an expensive holiday season is establish a new budget. Cut out any expenses that are not necessary. Some examples of things you may want to stop spending money on include:
- Eating dinner at restaurants
- Going to the movie theater
- Getting a coffee or other hot beverage every morning at a local coffee shop
- Clothes or accessories you do not need
- Ordering food for delivery
Avoid shopping as much as possible so you can get back on top of your finances, suggested U.S. News & World Report.
"I would encourage people not to accumulate additional debt," said Clare Levison, a certified public accountant and a member of the National CPA Financial Literacy Commission, to U.S. News & World Report. "Even though winter stuff might be on clearance, which seems crazy with the temperatures we've been having, try to resist going after the bargains."
It is imperative you remain within the confines of your new budget so you can get back on track and improve your financial situation as soon as possible.
Determine what to pay off first
You likely used your credit cards a great deal – especially during November and December. Because your credit card payment history and balances can have such a substantial impact on your credit score, ensuring you pay your debts off in a timely fashion is critical. Decide which cards have the highest balance and the greatest interest rate, then concentrate your resources on these accounts.
Create a plan and stick to it as you move into the new year. Making payments automatic can be especially beneficial.
"Don't assume paying off all of your debts will be enough to ensure your credit score is in good standing."
Increase income to meet new needs
It may be worthwhile to take on an additional job to accommodate new financial obligations or find another way to increase incoming cash. Something as simple as holding a garage sale, tutoring on the side or picking up a couple hours at your favorite store can help you get back on track after the holidays are over.
Evaluate your credit score
It isn't enough to just assume paying off all of your debts in a timely fashion will be enough to ensure your credit score is in good standing. There are additional factors that may bring down your score.
The holidays are a popular time for identity theft because more people are out shopping and traveling. This type of crime can cripple your financial future by pushing your score down. Make sure you regularly monitor your credit report and keep an eye out for any inaccurate items that may be present on your report. If you notice anything, report it right away. The faster you react, the less of an impact it will have on your future.
Set goals for 2016
Once you pay back your debt, U.S. News & World Report indicated you will need to establish new resolutions to further improve your financial situation in the future. Consider making a savings goal or revisiting your plan for retirement. After getting your finances back in shape, it is an opportune time to build on your current progress.