Last month we talked about how to avoid falling too deep into holiday debt. This month we’re focusing more on what to do if you still have debt from the holidays. Although the new year means sticking by resolutions to start off fresh, for many, it also means it’s time to lock up your wallet and create a budget to compensate for all that you spent during the holidays.
While this tactic can help some, for many Americans, holiday debt is just more financial issues on top of already-existing debt. TheStreet.com reported a Union Bank survey found that 33% said it would take them six months to pay off credit card debt. But if you’re unable to pay beyond minimum payments, you’re in for a longer haul than that. Debt.com noted that $1,000 on a credit card with an APR of 18% will take over five years to pay back when only paying the minimum. Experts advise that if you’ve racked up $5,000 in debt or more, it’s time to sit down and assess the damage.
Rest assured, you’re not alone, and there are paths to take toward a healthier financial future. You’re not bankrupt, and declaring so has far-reaching repercussions, including a hit to your credit score that will stay with you anywhere from seven to 10 years. Instead of going that dangerous route, consider working alongside credit counselors and trying a debt management program.
A debt management program is designed so that people struggling with debt from their unsecured loans—which includes credit cards, student loans, medical bills, personal loans, income taxes, and payday loans—can affordably pay down what they owe. Credit counselors negotiate with credit companies to lower interest rates and consolidate loans into an affordable monthly payment so that you can pay off your debt in a shorter time frame.
By choosing a debt management program, you’ll get the benefits of only having to pay one payment each month, reduced time on the phone dealing with collections agencies calling you, and eventually, a life that is free from debt.
Once you’re on the road toward paying off your debt, it’s time to set aside the credit cards and stick to cash. Cut back on household expenses and explore inexpensive ways to have fun. Just like dieting and exercise are a popular staple of many January resolutions, going on a cash diet can help you maintain a low-debt lifestyle and find financial happiness.