How to Bounce Back from a Spending Hangover

It’s that scary time of the year: Your December credit card statements start rolling in. I hope that you have everything under control and can pay off every balance in full. But if that’s not doable, I want you to promise me that you will be extra smart in how you take control of your spending hangover.

• Don’t Settle for Paying The Minimum Due. Fight the temptation to only make the minimum payment due. Push yourself to pay more. That not only will save you money in the long haul-you’ll get the balance paid off faster-but it is such an empowering move: You are making the choice to do more than the minimum.

• Get Into Full-Blown Trim Mode. Okay, if you are determined to pay more than the minimum, you need to come up with the cash to make it happen. Going on a “wants” diet for a few months might do the trick. Scale back your nights out with friends, or take a longer break between manis, pedis and haircuts. Add it up and you might find $100 or more extra in savings each month. I also want you to write down the cost of every subscription or monthly service you have. Anything you don’t use needs to be cancelled. Everything you keep needs to be trimmed. There is a cheaper cable package. There is a cheaper cell package.

• Give yourself a Deadline. I hope you realize that the credit card company wants you to take forever to pay off the balance. Every month they get to collect interest is good business for them. And a lousy deal for you. The average interest rate is around 15%, and rates will continue to rise in 2017 if as expected the Federal Reserve continues to raise its target interest rate. The smart move if you can’t repay a balance in full is to commit to a payback period. When we set tangible goals we are more inclined to make it a priority. A credit card repayment calculator will tell you how much your monthly payments should be to have a balance paid off in the time frame you choose.

• Focus on Highest Cost Debt. If you have unpaid balances on multiple cards, you need a comprehensive strategy for how to attack. It’s really quite easy: 

1. The card that charges you the highest interest rate is your priority to get paid off first. So on that card you must pay more than the minimum due each and every month. The goal is to get rid of that balance ASAP. 

2. At the same time, just make sure you are sending in the minimum due on any other cards. 

3. Once you have paid off the entire balance on the first card, make the next card with the highest rate your new focus. Take all the money you were paying each month on your first card and plow it into the second card. Keep at it until that balance is paid off. And if there is a third card in the mix, just make the minimum payments. Once you get the second card paid off, follow the same strategy with the next card.