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You've made it through the holidays, and now you're facing the reality that you've overspent on gifts. Now what?
For starters, don't panic. It's not uncommon for shoppers to want to make someone's holiday extra special and overspend their budgets. If you're in this situation, what's important is to develop a plan that will get you back on track with your budget as soon as possible.
The first step is to assess the damage. Did you pay cash for all of your gifts and are left with a low cash reserve to meet your regular monthly bills? Or, did you purchase items with a credit card, opting to defer payment until later and now have a significant balance to pay off? Either situation can place a burden on you to meet your monthly bill paying obligations.
The second step is to develop a strategy on how you're going to either rebuild your cash reserves or make payments on your credit card to pay off the debt. If you paid cash for items and are low on cash reserves, assess various areas where you can cut spending until you get your reserves built back up to a comfortable level. This might include cutting back on the number of times you go out to eat, eliminating the daily stop at your favorite coffee shop or reducing your grocery bills. Also consider taking up a hobby that is either low cost or free. If you truly assess all the items that you spend money on, odds are there are items you can do without for a while. Who knows, you may realize you can live without them forever and save that much more money.
If it's credit card debt, then assess your interest rates and work to pay off the higher interest rate first. Be sure to make more than the minimum payment, as this will pay the cards off faster and reduce the amount you will pay in interest. The same applies here for finding ways to cut your expenses.
Third, avoid taking on new debt. This is particularly important if you already have troubles making your current payments. This may sound like obvious advice, but many people have a hard time avoiding impulse purchases, even when strapped with debt. For many, it's the impulse shopping that has created the debt in the first place.
To avoid this, leave your credit cards at home or in the car when you need to go into a store. If you're grocery shopping, make a shopping list before you go and buy only what's on the list.
Fourth, look for ways to build or rebuild your savings. Even if it's just $10 or $20 a month, make an effort to put some money into savings. You will be amazed how fast your savings account grows.
Finally, if you need help understanding your budget or getting a handle on your debt, be sure to talk with your banker. We want you to be a good money manager, and budgeting is the first step. Not only will this relieve your stress, it will save you money and hopefully make 2013 a great year.
About Citizens Bank: Citizens Bank is a diversified financial services company providing a wide range of commercial, consumer, mortgage, trust and financial planning services to a broad client base. For more information about Citizens Bank, visit www.citizensbanking.com.
Adam Dykman is branch manager for Citizens Bank in Stevens Point.