Suffering from a Credit-Card Hangover?

Debt Reduction

The seemingly endless list of presents to buy; the struggle against the crowds; the visits from the in-laws " these holiday hurdles are over, but you have still got a pounding headache. Perhaps it's not from your zealous New Year's celebrating, but from the inevitable holiday credit-card bills that are going to come rolling in at any minute. If, like many people, you are suffering from a credit-card hangover, let the Illinois CPA Society help you accomplish this year's resolution of being debt-free by offering some sound advice:

Determine how much you owe
First, sit down and list all of your bills, including how much you owe, the interest rate and the minimum payments. And if you haven't received your bills yet, call your credit-card company, view your account online or use your receipts to calculate your spending. You don't want to be surprised when your bills finally do arrive. Once you know the total amount, you will be able to make a plan to pay off your holiday debt.

Reduce high credit-card debt
If you are carrying high credit-card balances, make debt reduction your first financial objective. Each month, make the minimum payment to each creditor, and then devote all remaining money to the creditor charging the highest interest rate. Or consider consolidating your debt on one low-interest credit card and making the highest monthly payment you can manage. (Before transferring a balance to your credit card, ask if there is a fee. A balance transfer fee can often wipe out any interest-rate advantage.)

Trim your spending
Make cutbacks over the next few weeks or months " however long it may take you to get caught up. Areas for potential savings could include dining out (especially the drive-thru); expensive, prepackaged food from the grocery store; gourmet coffees (switch to regular coffee rather than the $4 latte if you can't stop altogether), or your power bill (adjusting your thermostat by 1-2 degrees could trim your electric or gas bill).

Only make purchases that you can pay with cash
To avoid racking up additional debt while still paying off your holiday bills, only make purchases that you can pay for with cash or by check.

Plan for next year
To avoid finding yourself in the same situation next holiday season, plan accordingly. Many credit unions offer Christmas Club accounts that you can use as a savings account throughout the year to be spent on your holiday shopping. Look at how much you spent this year, divide that by 12, and put that amount into the account each month.

"It takes an average of at least four months for consumers to pay off holiday credit-card debt," said Elaine Weiss, president and CEO of the Illinois CPA Society. "Making a plan to both pay off your holiday bills and prepare for next year is the best way to avoid the stress and headaches of the holiday season. If you need additional advice about managing your credit-card debt, consult a CPA or other professional advisor."

The Illinois CPA Society, founded in 1903, is the fifth largest state CPA society in the nation, with more than 22,000 members. It is the only professional organization that represents CPAs in Illinois. During its over 100 years of existence, the Society has advanced the highest ethical and financial standards of the profession, and has been a leader in educating the public on financial issues.