How to Recover a Hangover from Your Vacation Spending – Forbes Advisor
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The holiday season is usually filled with joy and warm wishes. But that good humor can make even the most diligent people feel a little too comfortable with their finances. Vacation spending can get out of hand quickly, especially now that it’s easier than ever to buy almost anything, at home or on the go, with just the click of a button.
Fast forward a few weeks after these holiday festivities, and you could have a hangover. It’s not quite the same as what you might have felt the day after your binge at the annual office party. This hangover has an impact on your wallet: it’s the result of overspending on vacation.
Shoppers spent an average of $ 312 on gifts and decorations during the five-day period between Thanksgiving and Cyber Monday, according to estimates from the National Retail Federation. Overall, the trade organization predicts that consumers will have spent nearly $ 1,000 this holiday season, of which about $ 650 of that amount will be spent on gifts.
And during this particularly difficult year, you might be surprised at how easy it is to go too far in vacation spending.
Got a pile of credit card bills now that the gifts have been unwrapped? Did you go beyond food and drink fixations for what was meant to be your scaled-down holiday celebration?
It’s time to get back on track.
Why we spend too much on vacation
While managing your vacation expenses may seem like a simple problem, it isn’t, says Amanda Clayman, Financial Therapist and Financial Wellness Advocate for Prudential.
“It turns out to be a really complex and very deep type of event in our lives that makes a lot of sense and is fraught with pitfalls,” she says of holiday shopping. It’s not just about checking off items on a list. Rather, we are trying to find a way to represent an emotional relationship through a material object.
We’re supposed to demonstrate how well we know someone and do it thoughtfully or creatively, and at a price that’s commensurate with our financial situation.
And we don’t make this effort just once during the holidays, we do it with most of our relationships in the same short time. If you’re overwhelmed with all the gifting decisions you need to make and want to make it easier on yourself, Clayman says the easiest corner to cut is often financial. So instead of sticking to your budget, you allow yourself to spend more than you planned just so you can mark the task as complete.
Awareness can help you catch yourself overspending, Clayman says, but that doesn’t guarantee you’ll immediately resume your healthy habits.
How to get you back on track
Even if your finances were booming during the season, you can still expect to experience a bit of a vacation hangover.
“There is a lot of excitement and novelty during the holidays, and so there is a normal period of disappointment that is going to exist,” once the festive lights are put back into storage, says Clayman. “Expect a little mood drop after the holidays and try to be gentle with yourself as you go through this process,” she says.
Clayman recommends reviewing your credit card transactions regularly during the holiday season, so when your statement arrives in January, you’re not surprised by the total.
But if you haven’t tracked your vacation spending and are shocked when the bills arrive, give yourself room to observe before you react, advises Clayman.
Instead of telling yourself that you will never be able to spend money again because you will be in debt forever, take a step back. “Look at the scale and say, ‘That’s all I’m going to do with this [information] this week, ”she said. Take note of any feelings that arise; then let them settle in until a few days later than you have designated to take action.
While you’re in this phase of absorbing the seasonal shock, research the interest rate on any credit cards you’ve used, says Mike Kinane, head of deposits, products and consumer payments at TD Bank. . Kinane says most people have a general idea of their interest rates, but it’s important to understand the conditions for each card you have it in front of you when it’s time to start thinking about your repayment options.
Create a sustainable budget
Giving yourself time to process what you’re up against can help you plan a response that works for you, instead of making a post-vacation budget so strict it’s doomed to fail.
Clayman compares it to a swinging pendulum. “During the holiday season, we swing the pendulum to the end [being] permissive, impulsive, generous, optimistic, ”she says. Then after the holidays, the pendulum can start again in the other direction, with a too strict budget and an ambitious payment plan.
“But our goal, when it comes to financial behavior, isn’t to have these giant swings,” Clayman says, but rather to live somewhere closer to the middle most of the time.
When you create your post-vacation budget, don’t try to scrimp and save every penny to spend on your debt. Strive to create a plan that takes into account all of the expenses you have to come up with in the first few months of the year, balancing those obligations with your debt repayment goal.
“We never want to use our budget or our cash management as a form of punishment,” Clayman says, encouraging long-term sustainable financial adjustments instead. The feeling you’re trying to recoup if you’re recovering from overspending your vacation is safety and control, she explains, and you can achieve that without going to extremes.
How To Pay Off Your Vacation Debt As Soon As Possible
Gradual progress can help get your budget back to normal, but you may be able to speed up this process.
The best thing you can do to speed things up is find room in your budget to pay more than the minimum monthly payment, says Bruce McClary, senior vice president of communications at the National Foundation for Credit Counseling. “The minimum payment isn’t designed to get you out of debt quickly,” he says. “If you can pay even $ 10 or $ 15 more than the minimum, that helps. It won’t get you out of debt in a month or two, but it will speed up the process.
Getting out of debt faster saves you money in the long run: “You might have to make some adjustments and tighten your belts in other areas,” McClary says, but that short-term sacrifice is well worth it.
To progress even faster, check your existing credit cards for balance transfer offers with an interest-free promotional period, Kinane says. If you know it will take you several months to pay off your balance, but you can eliminate interest payments, “you’ve just taken a significant cost out of that balance,” he says. “It’s one of the easiest things consumers can do,” if you have good credit, to reduce your stress when you get back on track.
A balance transfer offer could be especially useful if you opened a retail credit card while on vacation. While these cards can offer significant upfront benefits and discounts to buyers, they often have some of the highest interest rates, which can wipe out your upfront savings.
Since balance transfer offers usually have an upfront fee, make sure that this amount doesn’t wipe out any savings you can hope to make by not paying interest. And make sure you have a plan to repay the full amount before the end of this promotional period, to avoid paying additional interest or an accrued interest penalty. It is important to know how use balance transfers wisely.
If none of your current cards have great offers but you have good credit, opening a new credit card may allow you to transfer your balance to a card that has a lower interest rate ( or zero, for an introductory period) to the one on which you paid your expenses.
An unsecured personal loan could be another way to reduce the cost of paying off your balance. The best personal loans have rates starting at around 4% – much more attractive than the typical 13-20% (or more) of a credit card rewards.
If you don’t want to play the balance transfer game or open a new line of credit, call your credit card issuer and ask for your interest rate to drop, McClary advises. If you’re a customer in good standing, you may be able to reduce your interest by a few points, which could help you save money along the way.
Another option to consider: will you get a tax refund in the spring? While it may be more satisfying in the long run to be able to invest that money in savings or on a rainy day, using all or part of your repayment to pay off your debt might help you get back to those goals faster.
Start thinking about the 2021 vacation
January and February provide a great opportunity to take stock of what you’ve spent to help prepare for next year, says Kinane, especially if this pandemic year has been unusual for your vacation plans.
While you may have saved some savings by not having to purchase airline tickets to visit family, you may have turned around and used those savings for gifts or other indulgences. “It’s swapping one expense for another,” Kinane says.
You’ll want to take these adjustments into consideration before setting a vacation budget for 2021. Whether or not you’re saving in a dedicated “vacation” savings account, you can build on your financial confidence and heightened awareness next winter. . to let the novelty of the holidays take over.