After the holidays, many American families find themselves in debt, typically with larger than usual credit card bills. Some surveys have shown that the average family spends 6 months paying down credit card bills after the holiday season! At that point, you’re practically ready to start buying for the next holiday season.
When Your Budget Needs Some TLC
For military families, holidays aren’t the only things that strain our budgets. Spending can get out of control during a PCS move. While some moving costs, lodging fees and meals can be reimbursed during a PCS, it’s important to study the paperwork in advance so you understand exactly what is covered. Even with reimbursements, many military families spend $1,000 or more out of pocket for a PCS move for non-reimbursed expenses like shipping a vehicle, pet relocation, purchasing new furniture, or replacing cleaning products and all the perishables in the kitchen pantry.
Even with reasonable spending habits, your family may find your household budget is out of balance after a major PCS move or the holiday season. If that’s the case, here are strategies to move forward into the New Year with a fresh perspective.
Get Spending Under Control
The first step to recovering from a holiday spending hangover is a heavy dose of honesty. You must look back at your previous credit card statements and see exactly where you spent your income. And then, you must slow things down. You can’t keep spending all year like you did during the past few months.
So, what will you change or cut back? Are there monthly charges or subscriptions you no longer need? Will you spend less on clothing after getting new outfits for the holidays? If your family enjoyed a great leave block in the winter, will you cut back on vacation and entertainment expenses for the first half of this year? The answers will look different for each family, but the important thing is that you and your spouse decide together to change the direction of your spending and bills.
Make a New Realistic Budget
Once you and your spouse agree to move the spending in a new direction, it’s time to do the hard work of making a budget and ironing out the details. Start by looking at your fixed monthly expenses: rent, auto payments, student loans, cell phone or cable bills, utilities, insurance, and other services that have a steady monthly payment. Be sure to include minimum credit card payments here. Then start to estimate averages for other essentials like gas, groceries, taxes, plus vehicle and home maintenance. You have to pay for these necessities first before you get to flexible spending.
Make sure you are paying yourself and have a plan to invest in the future. Do you and your spouse have a retirement plan? Do you contribute to an IRA account or invest in mutual funds? Even small monthly investments now can add up over the years.
Finally, once you have a clear picture of your fixed expenses and necessities, you can start to allocate money toward your flexible expenses. These are categories like ordering food, streaming video service, entertainment, date nights, alcohol, new clothes and concert tickets. Anything you don’t need to spend in this category can be used to pay down the balance on credit cards.
Consider Consolidating Debt
One strategy for lowering debt is to look at your interest rates on current bills, like credit cards, student loans and car payments. If you combine these debts into a personal loan with a lower interest rate, you can pay the same amount each month but make more progress in decreasing your total debt. Essentially, you will pay down debt faster and have a fixed payment each month, instead of a fluctuating amount on your credit card bill.
Service members can also go to military aid societies such as Army Emergency Relief, the Navy-Marine Corps Relief Society or the Air Force Aid Society. These organizations are located on base and will give free consultations to help put together a budget or manage debt. They also allow service members to get interest-free loans for emergencies like car trouble, broken appliances or emergency travel. While the money will be pulled from the service member’s future paychecks, getting it at 0% interest makes it a safe and affordable way to manage short-term debt.
Whether you find yourself struggling with holiday bills or post-PCS payments, you can use these strategies to get your household budget back on track.