Spent Too Much on Holiday Gifts? 5 Tips to Recover Your Savings

The holiday spirit can sometimes overflow into overspending. Now that the decorations are down, you might find yourself with big credit card balances and your “emergency” fund depleted. What can you do? Here are five tips to help you out!

1. Pay Highest-Rate Credit Cards First

You are faced with two financial dilemmas: credit card debt and no emergency fund to fall back on. Let’s make a plan to tackle these:

• After your living expenses are paid, divide your “extra” monthly money in half.
• Take half and deposit it into your emergency account.
• With the other half, make minimum payments on all of your credit cards, except the highest interest-rate card.
• Use any remaining money to pay down the highest interest-rate card.

Once you’ve paid off the highest-rate card, move on to the next highest. And once you’ve built your emergency fund to at least three months of living expenses, put that extra money toward paying off your remaining cards, in order of the highest interest rates.

2. Cut Expenses

It’s easy to say “use your extra money,” but harder to accomplish that. To do so, you need to review your expenses and cut where you can. Here are some ideas:

• Negotiate a new cellphone plan and get rid of your landline (if you still have one).
• Review your cable bill and cancel premium channels you are no longer using.
• Cancel unused or expensive subscriptions such as costly apps, gym memberships, and magazines.
• Eat more meals at home and avoid ordering drinks when you go out (drink water!).
• Be more selective when buying concert tickets and other costly entertainment activities.
• Consider local trips or staycations instead of expensive alternatives.

3. Look for Hidden Income and Cash

Believe it or not, most people have hidden sources of income or cash that they’ve overlooked or forgotten about. Consider checking these out:

• Instead of spending your tax refund, use it to pay down debt or replenish your emergency fund. If you typically get a substantial refund every year, adjust your withholding to keep more of your paycheck each month.
• Ensure that you have applied for and receive reimbursements for any work-related expenses or eligible medical expenses.
• Check for unclaimed funds at your state’s treasurer’s office or through online databases.
• Find and redeem any matured savings bonds you might have.
• Look through your house! Identify unwanted items to donate for tax benefits or to sell.

4. Rebuild Your Emergency Fund

While paying down your credit cards, it’s important to also rebuild your emergency fund. In Tip 1, you are simultaneously paying down your credit cards while accumulating three months of living expenses in your savings account. Once the credit cards are paid off, divert extra money to boosting your emergency fund to six months. This cushion is necessary should unexpected financial crises occur.

5. Plan Your Holiday Gifts Early

To avoid overspending next year, try these tactics before next year’s holiday season.

• Create a budget early, plan gifts for each recipient, and stick to planning.
• Try using unused gift cards and buy gifts early.
• Take advantage of sales during the year.
• Consider homemade gifts or experiences.

By implementing these tips, you can recover from holiday overspending, rebuild your financial security, and approach the next holiday season with confidence. Remember that consistency and discipline are key to achieving your financial goals!