The New Year is here and you may be dealing with some holiday leftovers -- not just useless gifts or extra pounds, but leftover debt from gift giving and entertaining.
If you find yourself faced with holiday debt, there are some steps you can take to pay down your debt and get back on track with your finances.
The first step is to assess your expenses and create a monthly budget. Your budget should include all expenses you incur during the month such as mortgage or rent payments, utilities, food, transportation and entertainment.
Also, budget for periodic expenses such as insurance premiums, taxes or new tires for your car. For example, if your car insurance premium is $1,200, set aside $100 each month.
Once you've created your budget, prioritize your expenditures. Determine what items in your budget are necessities and what items are wants. Estimate the costs of your expenses, and set spending limits where you can.
If you have money leftover after your monthly expenses are paid, put that money towards your debt, and put some into savings if it's possible. Pay down any high interest credit cards or loans first. This will save you money over time.
If you don't have money left over after your monthly expenses are paid, or if you would like to have more money to put towards your debt or savings, it's time to figure out where you can trim from your budget.
If you go out to lunch during the work week, try to take your lunch more often. Bring coffee or tea from home instead of stopping to buy one every day. Reduce your entertainment expenses by looking for free or inexpensive events in your area such as free museums or reduced price days at local attractions.
Get into the habit of comparison shopping. Check the prices of large and smaller purchases at three different stores to find the best buy. You may also have to let go of your loyalty to a particular brand if another brand offers the same quality product at a lower cost.
Also, review your utility and insurance plans. Make sure you have the appropriate level of service or insurance coverage. For example, if you have a mobile phone calling plan with 500 minutes a month and you are using 700 minutes a month, you're paying for those extra 200 minutes over and above your monthly fee. You may be able to save money by switching to a plan that offers more minutes for less money than you're paying in overages.
Some other tips for managing your budget are:
* Balance your checkbook every month.
* Organize your bills and receipts, and keep them all in one location.
* Pay all of your bills on time. Late fees are costly and quickly derail your budget.
* Create a cash flow calendar that lists all of your expenses and their due dates.
It's also important to recognize the early warning signs of debt trouble, such as getting behind on basic payments like your utilities, skipping some debt payments to make others and using credit to buy items you should be able to buy with cash, like groceries.
If you've made all possible adjustments to your budget, and you see signs of a debt crisis, get help. Don't be afraid to call your creditors as soon as you realize you're going to have problems. Explain your situation and what you are doing to meet your debt obligations. You may be able to negotiate your next payment or a lower interest rate.
You can also call a credit counseling agency for help. Make sure you research credit counseling services carefully before you choose an agency. Find out if the agency offers money management advice without obligating you to sign up for a debt management program. Find out what fees the agency charges, what services they offer and what national affiliations they have.
Find out if the credit counseling agency holds membership with National Foundation for Credit Counseling, the umbrella association for over 115 credit counseling agencies nation-wide that promotes the highest member standards for credit counseling. You can visit the NFCC's web site for a list of member agencies.
Know that you can get ahead financially even if you are currently overwhelmed with a financial crisis or shortfall. The most important thing is to take action and take control of your financial situation.
Kristen Garrett is the public relations coordinator for Advantage Credit Counseling Service, a 501(c)(3) non-profit community agency based in Pittsburgh, Pa. http://advantageccs.org
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