Fighting a Financial Holiday Hangover? Eight Tips for Digging Out of Debt (And Enjoying a More Financially Sane 2015!)
If, like many Americans, you feel slightly sick when you look at the state of
your post-holiday finances, Donna Skeels Cygan has eight timely tips to
help minimize the damage and ensure it doesn’t happen again.
Now that all of the gifts have been unwrapped, the decorations have been put away, and the excess calories have been consumed, you can’t fight it any longer. You know, that gut-churning, headache-inducing, sleep-preventing ailment that’s been in the making for weeks (or even months): a financial hangover. Like many Americans, you’ve overspent in your pursuit of the perfect holiday season. And now that the bills are rolling in, you’re paying the price.
Fortunately, financial advisor Donna Skeels Cygan is here with a timely remedy.
“If you’ve overindulged financially, this isn’t a hangover you can simply sleep off,” says Cygan, author of The Joy of Financial Security: The art and science of becoming happier, managing your money wisely, and creating a secure financial future (Sage Future Press, 2013, ISBN: 978-0-989-77844-2, $24.95, www.joyoffinancialsecurity.com). “Putting your head in the sand never improves your finances.
“But the good news is, you can take steps to treat many of the painful symptoms you’re feeling right now (like regret and anxiety)—and to make sure that your financial future is healthy,” she adds.
In The Joy of Financial Security, Cygan combines her financial expertise with research from psychology, neuroscience, and economics to shine a light on the complex relationship between money and happiness. Here, she shares eight specific strategies to help you alleviate the symptoms of your current financial hangover—and prevent a new one from developing in the future:
First, stop the bleeding. You can’t undo the financial distress you’re already feeling, but you can prevent it from worsening. In other words, curtail all unnecessary spending!
“Avoid malls, shopping centers, and your favorite retail websites in the weeks to come,” says Cygan. “Just like a recovering alcoholic at a bar, chances are, you won’t be able to resist the great deals if you put yourself in temptation’s way.”
Get real about what you really spent. When you’re suffering from a traditional hangover, the last thing you want to do is relive the drinks that led to your current condition. You may have the same impulse when it comes to dealing with a financial hangover. But even though the process is uncomfortable, it’s important to calculate exactly what you spent during the holidays.
“Don’t estimate or rely on memory,” Cygan instructs. “Look through your receipts and/or bank account records and include all holiday-related expenditures—not just gifts and decorations, but also food, clothing, travel costs, etc. Often, there’s a disconnect between what we think we spent and what we actually spent. (Does But I really didn’t buy that many gifts! sound familiar?) Until you get real about where your money goes during the holidays, you won’t be able to prevent overspending in the future.”
Identify your holiday spending temptations. Once you stop kicking yourself for overspending, take a look at why it happened. Can you identify a pattern? Common culprits include last-minute shopping, being seduced by sales, keeping up with the Joneses, and impulse buys.
“Knowing why you tend to slip up will help you prevent it from happening in the future,” Cygan notes. “For instance, if you tend to succumb to each slick sale that catches your eye, you can resolve to make a list of gifts you intend to buy before you hit the mall—and stick to it!”
Recoup what you can. Did you buy anything during the holiday shopping frenzy that you can return? Maybe you bought two new cocktail dresses complete with shoes and accessories, but wore only one of the ensembles to holiday parties. Perhaps you bought a small pile of generic gifts that you never ended up giving to anyone. Or maybe you bought clothing for your teenage daughter that you now realize she will never wear.
“If you don’t really want an item or won’t use it, see if you can get your money back,” Cygan instructs. “And what about gifts that others gave you? If you don’t think there will be any repercussions, return items that would otherwise gather dust. (Just don’t tell Miss Manners.)”
Bring in some extra money. Is there a way to bring in some extra money to help you pay off your holiday debt sooner? Maybe this is a good time to clean out your closet and take gently used items to a consignment shop. You can also add unwanted but non-returnable gifts to the pile. (Bonus: You’ll feel better for having de-cluttered and streamlined your life going into the new year!)
“You might also resolve to do your taxes as soon as possible if you expect to receive a refund,” Cygan suggests. “Also, if you purchased any gifts that included a rebate, make sure to redeem it. And while it doesn’t involve bringing in extra money per se, you can relieve strain on your wallet by using any gift certificates you may have received during the holidays. Don’t save that restaurant gift card for a special occasion—go ahead and use it before you forget it exists!”
Develop a plan for paying it off. This hangover won’t go away on its own—you need to get serious about tackling the debt quickly. So, gather all of those outstanding bills and figure out the best way to pay them off as soon as possible.
“Specifically, budget in a way that you aren’t paying for the 2014 holidays throughout 2015,” Cygan comments. “This might mean cutting entertainment expenses or working part-time, and should certainly involve tackling the largest interest rates first. Until you do pay off holiday debt (and preferably, afterwards too!), I recommend laying off the credit cards and sticking to cash whenever possible. Studies have shown that we spend about 15 percent more when we use a credit card rather than cash.”
Record the gory details. Journal how you’re feeling right now. Yes, write it all down: the anxiety, the frustration, the anger, the regrets. This is an invaluable tool for stopping the overspending cycle next year.
“You might want to put a copy of this document where you’ll be sure to see it next holiday season—tape it to a box of ornaments or decorations, or pack it with your wrapping paper and ribbon, for example,” Cygan says. “Or just set a reminder on your smartphone to read through your financial reflections in November.”
Determine what was worth the money. As you reflect on the past holiday season, pay close attention to what mattered and what didn’t. For example, paying several hundred dollars for a holiday musical performance that two members of the family slept through might not be worth repeating next year.
“So often, we do the same thing every holiday season expecting different results,” Cygan observes. “Make 2015 the year you break the cycle, especially when it comes to purchases and expenditures that aren’t in line with your values. The good news is, you have plenty of time between now and December to plan ahead. You might want to suggest to friends and family that you substitute experiences for excessive expenditures. Chances are, they’ll thank you for putting a stop to the madness.”
“Best of all, if you take steps to address your holiday overspending, you may find yourself paying more attention and making deliberate money management changes throughout the year,” Cygan concludes. “Being financially responsible feels really, really good. And it never comes with a hangover.”