It can be easy to justify last-minute holiday purchases for loved ones, no matter the cost. But how do you get your finances back on track after overspending?
Here are some tips that will help you get through the winter doldrums.
1. Assess the situation
Start by evaluating your income and spending habits before making any more purchases. If you’ve accrued credit card debt, it’s important to understand whether you can pay it back right away or need to establish a repayment timeline based on other recurring expenses. Then you can create a realistic budget and payment plan to work toward chipping away at the balance.
Remember that your credit card balance will start accumulating interest if it rolls over into the next month. If you can, maintain a consistent payment schedule to minimize interest costs and potential negative impacts on your credit score from late or missed payments.
Read more: Keep your finances on track with spending buckets
2. Set your budget
By creating a budget, you can determine which spending categories to cut back on and redirect that money toward paying holiday debt. For example, nonessentials like gym memberships, streaming services and takeout meals are areas you can reduce until you’re debt-free.
It can be hard to keep from splurging. Once you’re back on track, you can steer clear of overspending using spending buckets with an Ally Spending Account. Set aside the money you need for holiday shopping and other nonessential expenses ahead of time by allocating specific amounts to buckets named "holiday," "dining out" and "membership fees," for example.
3. Prioritize saving ahead
Prepare for the next holiday on your calendar. You can grow your savings for festivities that are months out. Open a savings account with a high annual percentage yield, like the Ally Bank Savings Account that offers a rate that’s more than five times the national average. Then start a specific holiday savings bucket and use automated boosters like recurring transfers to regularly move funds from your checking account to savings, or Surprise Savings, which analyzes your spending habits to find where you can save more.
Anticipate potential expenses by assessing which holidays take priority and make a list of what you want to buy before you go shopping.
4. Avoid future overspending
Now that you’ve created a budget and debt repayment plan to level out your spending, create a holiday shopping strategy to make the most of your budget.
Anticipate potential expenses by assessing which holidays take priority and making a list of what you want to buy before you go shopping
Set a realistic (and strict) budget for “extra” purchases — it can be tempting to throw limited-edition or holiday-specific items into your shopping cart while you browse
Assess whether you’d like to buy a gift or an experience. Doubling up and splurging on both can create additional strain
Plan to take advantage of sales, discounts and cash-back offers. Knowing where you can earn rewards, save money or get cash back can offset your expenses and help you stay out of debt
No one enjoys the consequences of overspending — especially during the holidays. Instead, plan ahead and keep an eye on your budget to make sharing gifts and special moments with your loved ones stress-free.
