Did summer fun blow your budget right out of the water? It happens to millions of people. Summer is a carefree time and a time to spend with family and friends. Budgeting takes a back seat as we focus on fun.
But then reality settles in and we realize we went over budget and now have to recover, but how?
Be Honest with Yourself
You can’t get back on track unless you are honest with yourself about what you need to do. Look at your finances and figure out what damage you did.
Pull your bank statements from the last few months and compare the spending to your budget. Look at your credit card statements too. How much credit card debt do you have or how much did you deplete your savings?
Write down where you stand and then figure out a plan.
Figure out how to get out of Debt
If you have credit card debt, you need to get out of it as fast as you can. The high interest rates can drown anyone.
If you can’t pay the debts off in full, don’t worry, there are a few ways to you can create a debt payoff plan:
- Debt snowball – Order your credit card debt from smallest to largest balance. Make the minimum payment to each debt, but any ‘extra’ money you can pay toward the first debt, add it to the minimum payment. Keep doing this until you pay off the first debt. Next, take the amount you paid to the first debt (minimum payment plus the extra payment) and add it to the next debt. Keep doing this until you’re out of debt.
- Debt avalanche – Order your debts by interest rate, highest to lowest. Using the same strategy as the debt snowball, make the minimum payments to each debt but make extra payments to the first debt (the one with the highest interest rate). Keep doing this until you pay the first debt off – it may take longer since it has the highest interest rate. Move onto the next debt, keeping the avalanche going until you’re out of debt.
See Where you can Cut Back
While you work on your debt payoff plan, see where you can cut back on expenses. This is a great time to revisit your budget and spending. Can you cut back on groceries, entertainment, switch insurance providers to get cheaper insurance, or cut back on your cellphone and internet spending?
Get creative in the areas you cut back so you have the extra money to use for your debt payoff plans.
Getting in over your head in debt after summer spending is common, but it can feel impossible to get out of. If you struggle with your finances or don’t know where to start, call the experts at Creditaid and let us help.
We’ll guide you through the right steps to get control of your finances and your debt so you can feel in control again.