AlamyBy Geoff Williams
Ask anyone you know, and everyone seems to have a cure for a hangover. Some of the more traditional fixes include aspirin or ibuprofen, lots of water, coffee and lots of food. Then there are more unusual remedies, like drinking pickle juice. But how do you cure a financial hangover? You overspent before the holidays, and now the balance on your credit card bills looks terrifying in the sobering light of January.
At least with a typical hangover, if your attempts to alleviate the pain don’t work or you simply don’t fight it, the misery will end sooner rather than later. Doing nothing when you have a financial hangover can make your situation worse (i.e., your debt will grow), and even if you try to immediately cure it, the effects can last for months (i.e., the debt may be gone, but money may still be tight). So if you spent a little too much leading up to the holidays — or went way overboard — here are some options to help you undo the damage.
Return some items. This may not be much of a solution since you can’t very well go to your friends and family and ask for your gifts back, and you certainly don’t want to suggest to your children that Santa might want to repossess a few presents. Still, it’s a strategy worth a few seconds of consideration. If you got carried away and made some expensive purchases for yourself in December, keep in mind that most stores have at least a 30-day return policy.
Utilize your credit cards. Yes, your credit cards may have gotten you into this mess, but they may be able to help get you out of it. Randy Hopper, vice president of credit cards at Navy Federal Credit Union in Vienna, Va., suggests a balance transfer. That is, if you have a credit card with one of those low- or zero-interest deals, many of which are up to 18 months, and you can transfer the balance of your other credit card, you’ll have a place to put your debt, with low to no interest, while you try and pay it off.
But Hopper warns: “Be mindful that once the initial balance transfer period is over, the interest rate will jump to a higher rate.”
Avoid shopping. Try to steer clear of the post-holiday January sales. “I would encourage people not to accumulate additional debt,” says Clare Levison, a Blacksburg, Va.-based certified public accountant and a member of the National CPA Financial Literacy Commission. “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.”
Do your taxes now. If you have a big, fat refund coming, Levison points out that it could be the cure to your post-holiday hangover. “And anything you have that’s left over, I, of course, have to suggest that you should put into savings,” Levison says.
Bring in some extra money, creatively. It may not solve all of your problems, but you could try to raise some extra income quickly, suggests Andrew Johnson, spokesperson for GreenPath Debt Solutions, a nationwide nonprofit headquartered in Detroit that helps consumers with credit card debt, housing debt and bankruptcy.
“Look for unused items around the home than contain scrap materials that can be sold quickly, like iron or brass. My mother sold a roll of copper screen on her own that she found in her basement, and made some quick cash,” Johnson says. He also points out that you could try selling or pawning unwanted items.
Use this moment as the catalyst to start budgeting. If things are really bad and you want to fix your finances so this never happens again, “you’ve got to make changes,” says John McFarland, a personal finance professor at Virginia Commonwealth University in Richmond, Va. “The good news is that these same changes might lead a to a financially healthier holiday season next year if you make them permanent instead of temporary.”
While you examine your budget and decide where to make changes, McFarland suggests doing what you would do if you had binged on food or alcohol. “Unless you’re an addict, you lay off for awhile. Let’s do the same with money. Put away the credit cards, pay everything with cash except for your regular bills and begin to understand your baseline financial position,” he says.
Incorporate your debt into your other resolutions. This is a time of year when you may be resolving to lose weight or exercise. “So that makes it a great time to cut your budget in eating out and entertainment,” Levison says. “If you eat at home more often, it’ll save you dollars and calories and you can use that money to go toward your holiday bills instead.”
You could even try to convince yourself of this: All of this holiday debt you’re wallowing in could be the best thing that ever happened to you if you use the experience to make positive changes in your life, like eating less fast food or becoming better at budgeting.
As financial hangover cures go, “that is a more positive spin on things,” Levison says.
And at least you don’t have to drink pickle juice.
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