The holidays can be a rush of many things — presents, parties, cookies, casseroles … and sky-high price tags.
And when this festive time is over, financial experts say you’re not alone if your bank account has taken a hit.
If getting back on track financially is one of your goals, NCTV17 has you covered. We spoke with three money pros — a professor, a financial fitness coach, and a fiduciary financial advisor — to put together this list of ways to get your budget back in balance. Check it out and take heart, these pros say: Changing your spending and saving habits is just like changing any behavior — it takes work, but with a solid plan, accountability, and support, great progress is within reach.
“Being mindful of why you’re making these changes can help sustain the behavior,” said Jill Kimak, financial fitness coach and outreach manager at H.O.M.E. DuPage. “You’re making a plan and taking steps forward.”
1) Assess the damage
A starting point for any financial goal is to know your numbers, said Ryan Decker, associate professor of economics and director for the Center for Financial Literacy at North Central College in Naperville.
The federal government allows any adult to check his or her credit report weekly, for free, without penalty. But don’t Google it and click some random credit monitoring service, Decker says. Use annualcreditreport.com, and find it there.
Checking your credit report helps determine if you have any unknown debts or accounts in your name. Viewing your credit report is not the same as checking your credit score — that’s a proprietary model developed by credit agencies, Decker says, and checking it often comes with a price.
After reviewing your credit report, experts advise listing out all your debts on credit cards, online stores, buy-now-pay-later programs, or other sources — as well as their interest rates. This will help you make a plan for repayment.
2) Set clear goals and adjust your mindset
This is the part where you get to choose. Are you trying to pay off holiday bills, eliminate high-interest credit card debt, begin saving for education, or start contributing toward retirement?
It’s up to you, but financial experts say this is where some guidance can help.
H.O.M.E. DuPage offers free financial education courses, conducted virtually, and free one-on-one financial counseling to anyone in need, Kimak says. Financial advisors, such as Nick Stenger and his colleagues at Stenger Family Office in Naperville, also can offer coaching, encouragement, and accountability, he said.
When paying off debt, it’s best to focus on your strengths and not tell self-defeating stories like “I can never do this,” Kimak says. “The first step is really the right mindset.”
3) Build an emergency fund
Having funds to pay for three to six months of living expenses in the event of a job loss or other drastic change is an important next step, Stenger says. He advises storing this money in a high-interest savings account, which could have a rate of 4% to 5%, or a money-market account.
4) Make a budget
Yup, you’ve gotta do it. And experts advise carefully tracking your spending for at least 30 days before creating your spending plan.
A solid budget covers your basic needs and categorizes your bills so you can see how much you spend on each purchase or service.
“A lot of people don’t like to do a budget because they feel it’s too restrictive,” Kimak said. “It’s actually the opposite because you’re actually giving yourself permission to spend on things that align with your financial goals.”
When tracking your spending, Stenger advises to take your total monthly spending and divide it by 30. After you know how much goes out each day, you can look for ways to decrease it by $10 to $20 — like brewing your coffee at home, making a sandwich for lunch, steering clear of online stores, or avoiding impulse purchases. These incremental savings can go a long way toward paying off holiday bills, Stenger said.
5) Create a debt repayment plan
There are several schools of thought on how best to go about paying off debts, North Central’s Decker says. He knows many people — possibly inspired by the well-known finance guru Dave Ramsey — prefer the “snowball method,” paying off the smallest debt first, enjoying the progress, then putting any surplus money toward bigger bills over time.
But Decker says the most financially savvy way to eliminate debts is to pay off those charging the highest interest rates first. Credit card interest rates can be as high as 27% or 28%, Stenger says, so paying those first can save you more. Kimak says she always advises clients to pay more than the minimum due each month on their credit cards, even if they’re only paying an additional $5 or $10.
Keep the success going
With these steps in progress, your finances could look better next holiday season, experts say. A few other tips can help too.
Decker says it’s perfectly acceptable to spend more during some times of the year than others — if you’re prepared. So next year, save more during non-holiday months and pick up some gifts early. Make sure not to pay for anything on a credit card if you don’t have money in the bank to cover it. And avoid those buy-now-pay-later plans.
Find a system that works for you to keep track of your money in all its various places — checking, savings, credit, investments, and retirement accounts. Then, stick with it.
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