Daily Press (Sunday)

Overspent in December? Here’s how to battle the January blues

- By Kimberly Palmer NerdWallet

The first workday in January after the holidays hits a little bit differentl­y: The parties are over, debt payments are soon due and it can feel like there’s nothing to look forward to.

You may be able to minimize the doldrums with some planning and other steps to turn things around, financial experts say.

“Financial stress can be temporary,” said Tonya Rapley, financial educator and founder of the millennial money and lifestyle blog My Fab Finance. She suggests focusing on small steps such as paying this month’s bills, then reminding yourself that you can recover from December’s overspendi­ng.

Here are a few more ways to fight this month’s financial downers:

Make or update a budget

The new year is a great time to create or update a budget, which can give you back a sense of control, said Mike Croxson, CEO of the National Foundation for Credit Counseling, a nonprofit financial coaching organizati­on.

The popular 50/30/20 budget, for example, suggests putting

50% of your take-home income toward needs, 30% toward wants and 20% toward savings and debt paydown. You can adjust those percentage­s as needed, especially if you live in an urban area with high housing costs.

“The best way to get control back is to make a plan,” Croxson said. “You can get back on top of this and back to where you feel good about your finances.”

Pay off debt

With interest rates higher than they were a couple of years ago, credit card debt is also more expensive, which makes paying it off a financial priority. How exactly you do that is up to you, Croxson said.

“Paying off the highest interest rate balance first makes the most common sense, but for some people, paying off the smallest dollar amount first is most important because they feel like they accomplish­ed something,” Croxson said. Small wins can give you momentum to continue.

Online calculator­s for those two methods, known as the avalanche and the snowball, respective­ly, can help you stay on track.

Track your payments carefully

If you purchased holiday gifts using “buy now, pay later,” which allows shoppers to split payments into multiple installmen­ts, then it’s important to note when those bills are due, said Christine Alemany, chief marketing officer for i2c, a global banking and payments platform.

Alemany suggests tracking your buy now, pay later due dates with a financial management tool or spreadshee­t to avoid late fees or interest charges. “The variety of payment methods that consumers now have gives them the option to choose what’s best for them,” she said, but “that convenienc­e needs to be balanced by discipline.”

Build up savings

Amid all of that repayment, it’s also important to find a way to save money, Croxson said. “Having a savings line item in your budget is a critical step for virtually every consumer, even if it’s $20 or $25 a month,” he said. “There will be an emergency, and you will need it.” Being able to turn to savings in the future also helps you avoid building up debt again, he added.

The good news for Americans is that positive signs in the economy, such as a slower rate of inflation and lower gas prices, means it’s a little easier to find room for savings, according to Alan Gin, associate professor of economics at the University of San Diego’s Knauss School of Business.

With gas prices coming down, Gin said, “not only will consumers be more confident, but they will have more money.”

Know your rights

If an expensive item you bought or received as a gift in

December breaks in January, that’s another potential downer, which is why knowing your refund rights is critical, said Wayne Hassay, partner attorney for LegalShiel­d, a legal services provider. He suggests keeping track of all paperwork related to the item and any warranty attached whenever you make a big-ticket purchase.

In some cases, paying with a credit card can give you additional protection­s, he added. And if your pricey new electronic­s break, don’t hesitate to follow up with the retailer or brand until you get a satisfacto­ry response, which could be a refund or a new product.

Get help if you need it

Working to pay off debt and get back on budget in January can feel lonely because it’s such a solo activity, which is why it’s helpful to reach out for additional support, whether that’s from financial profession­als or friends and family.

“Be honest with people,” Rapley said. She suggests sharing in a friend group chat if you are looking to scale back and spend less, because you’ll likely find encouragem­ent that can help you stay on track. “That communicat­ion is definitely important,” she said, and can help you feel less alone — and with more good things to anticipate in the year ahead.

 ?? GETTY IMAGES ?? Devising a plan to face down bills and debt from the previous month can help.
GETTY IMAGES Devising a plan to face down bills and debt from the previous month can help.

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