Have you found yourself bringing home more than just souvenirs from your last few trips? Maybe you dipped into the red on your last vacation, or your budget didn’t quite last. Going into debt to pay for a vacation getaway is something nearly three in four Americans have done at some point. So how do you tackle that vacation debt?
Ideally, you won’t come home from your holidays with any debt at all, but it can happen to the best of us. Sometimes budgets fail, emergencies come up, or people just make mistakes. Whatever the reason, if you’re swimming in debt before you even get home, here are some helpful strategies for banishing that cumbersome vacation debt.
Get a Handle on Your Situation
The first and most vital step to eliminating your new debt is to come to terms with it. You need to assess your charges, interest rates, and the total amount of money you owe. It’s very easy to ignore your debt, dealing with each individual bill as it arrives in the mail, but hiding from your problem will only make the whole situation worse. You stand a much better chance of quickly banishing your debt if you get organized from the start.
This means no procrastination. As soon as you arrive back home, locate all your credit cards and check the balances on each one. Identify the interest rates and due dates on each card.
Redraw Your Budget
When you find yourself in unexpected debt, one of two things has happened. Either your original budget isn’t working, or you have stopped following it. Either way, you need to check back in with your budget to determine where you can save money and how much you can afford to put towards bills each month. Easy places to cut in a monthly budget include the following:
- Subscriptions services
- Lunch and dinner costs
- Transportation
- Phone plans
Once you’ve secured some extra cash from your budget, you’ll need to commit to a monthly debt payment plan. Come up with a set amount of money you’ll be putting towards debt payments each month–and don’t waver on it. You need to make sure you don’t fall below your assigned amount, or you’ll risk falling behind.
Prioritize Your Cards
Some credit cards are more urgent than others, and these are the ones that should be paid off first. Obviously, you’ll need to meet your minimum payment on every card you have to avoid collections. After that minimum is met, you’ll need to devise a strategy. Do you prioritize one card over all others, or is it in your best interests to pay them all off on the same time? This will depend on several factors.
For example, are you looking to close any of the cards after paying them off? If so, put those cards first in line. Do your cards all have comparable interest rates, or are some sky high? How much do you owe on each one? Some people prefer to pay off smaller debts more quickly before tackling larger ones because it makes bookkeeping easier. The choice is entirely yours, just make sure you have a plan.
Pay it Forward
It’s never fun, but when you have debt hanging over your head, you need to throw extra money at it. Even if you’ve made all your payments, when there’s extra money to be had, send it to the credit companies. No one wants to sacrifice fun money to the seemingly bottomless pit of credit card debt, but it will be worth it in the end. You’ll be out of debt faster, and you may save a significant amount on interest.
Devise a Savings Plan
Don’t wait until the last minute to start saving for your next trip. Even if you don’t have one planned, start putting some money aside as soon as you are debt free. Consider putting your vacations down as a category in your budget and treat the savings like a bill that you have to pay every month. While you’re setting a savings goal, remember that old adage: pack half the clothing and twice the money that you think you’ll need.
Clawing your way out of debt is never fun, but there are some well-worn strategy guides that can give you a leg up. If you find yourself in a vicious cycle of racking up debts and then struggling to pay them off, it may be worth going back to the drawing board and taking a hard look at your finances and budget. A little planning can save you from a huge headache later. And remember it is better to plan ahead and avoid the debt in the first place. Include vacation spending in your budget and then stick to it.
About the Author:
Christine Yaged is a co-founding partner and Chief Product Officer of FinanceBuzz. Christine launches and scales brands. She is passionate about technology, digital marketing, and people.
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