Curing the holiday debt hangover
By Philip Vyce, Chief Petty Officer, U.S. Navy (Ret.) and Military Relations Manager for Pioneer Services
Every year, millions of Americans quickly discover that all those presents under the tree have led to a mountain of bills in their mailbox. Consumer groups call it the “holiday debt hangover,” an affliction that affects millions of Americans each year after the holiday season (to the tune of $63.6 billion in credit card debt alone in 2006, according to Consumer Reports).
For military families, it can be even more difficult due to tighter budgets and lower pay than civilian counterparts. Add in the stress of having loved ones deployed and the pressure can be difficult to handle for any military spouse.
There is a cure, however, and there are a few things you can do to not only recover from this past holiday season, but also make sure you don’t fall victim next year.
Paying off last year
The Web site creditcards.com notes that the average household charged $1,100 in 2006 for holiday gifts. Consumer Reports noted on CNN that “credit cards can be hazardous to your holiday spending.” But that’s not to say that credit cards aren’t without their merits—they are easy to use and accepted virtually everywhere.
So if you are going to use a credit card to do most of your shopping, take a few things into consideration:
For example, if you had $4,500 on a card with a 15 percent rate, and you made just the minimum payment every month (four percent of the balance), it would take you 134 months (11 years) to pay off and you would have to pay nearly $2,000 in interest. Even if you moved that balance to a card with an interest rate of only seven percent, it would still take you 111 months (9 years) to pay the balance in full.
If you cannot pay it off in full, do whatever you can to pay off more than the minimum amount. And if your spouse has some sort of bonus coming (combat zone exclusion, hazardous duty pay, etc.), consider using that to pay off the balance.
If you simply find yourself buried with credit card bills to the point that you’re not sure what to do, consider going to your bank or credit union and getting some sort of consolidation loan. While the monthly payments may be a bit higher when compared to a minimum credit card payment, it can be a vital part of striking a balance between your monthly budget (something that is vital on a tight income) and long-term financial success. You’ll also know exactly when the debt will be paid, something that cannot be underestimated.
Preparing for next year
Once you get your past spending taken care of, the next step is to plan ahead for next year’s holiday. There are several ways to do so:
While these tips can be helpful, they won’t mean much without financial discipline. So maintain the budget you drew up, avoid those last-minute decisions, and find creative solutions for sometimes-difficult problems. If you do, it’ll make the holiday celebrations that much more sweet.
About the author
Philip Vyce spent 21 years on active duty in the U.S. Navy before retiring as a chief petty officer. He is currently the military relations manager for Pioneer Services in Hampton Roads, Va., where he serves on the boards of the Armed Services YMCA, is a Task Force Chairman for the Chamber of Commerce, and is active in a number of local military organizations. He is also an Accredited Financial Counselor and a Certified Credit Report Reviewer.
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