How to recover from holiday debt

  • Published
  • By Maj. Vincent Casquejo and Master Sgt. Chris Phillips
  • 22nd Maintenance Squadron commander and first sergeant
The holidays are over and the decorations are put away. Maybe, or soon you will receive the inevitable, unwanted gift that all are sure to receive regardless of if you have been naughty or nice--your bills for last month's purchases.

If a cold sweat is forming on your brow as you read this, take a deep breath and do not fret. We can offer you some free advice.

Setting a budget
First, if you do not have a budget, the New Year is a perfect time to establish one. There are a number of resources available to help assist you in this endeavor, including computer programs that automatically track spending and income (numerous banks offer similar capabilities for free on-line) or if you need more personal guidance, the Airmen and Family Readiness Center provides financial counseling free of charge.

Creating a budget is a fairly simple process. Start by determining how much money you earn after taxes, and what your total expenses are including housing, utilities, auto loans, credit, food, entertainment, etc. Continue doing this for about four weeks, categorizing every income and expense item in a log, remembering to keep receipts for everything. At this point, you should have a basic budget that shows where your money is going, and how much you should have left over each month. This will enable you to start the next phase, validating your budget.

Validating a budget
You now need to ensure your budget is correct. For the first month, you may come up a little short of what you were expecting, but do not panic. Instead, go back and review your expenditures on incidentals or utilities, and you might find that you under-budgeted for these items.

This is pretty common if you set your budget based on a gas bill from August and you are now getting your December bill with a rude surprise for that extra heat you have been enjoying in your house. In these instances, you may have to adjust your utilities budget based on seasonal use.

Another common mistake is under-budgeting for food. If you frequent local restaurants three to five times per week, you might want to consider packing a lunch at least twice a week until you can lower food expenses within your budget. Once you can get within your budget, you can begin taking the right steps to get out of debt.

Getting out of debt
The most important step to get out of debt is to stop the credit card insanity. Only use your credit card for expenses you know you can pay-off at the end of the month. If you cannot do this put your credit cards, all copies, in a locked desk drawer until you pay them off. Use credit cards only to make purchases you can pay from month to month, or for large ticket items you have saved for.

Next, rank your credit cards by interest rate from highest to lowest. Add your monthly payments into your budgets paying as much as you can on your high interest cards first, and making at least the minimum monthly payments on your lowest interest rate cards.

After you start living by your budget and attacking your debt, you can start saving money for a "rainy day" or for retirement. Again, add savings and investments into your budget. There are numerous ways to achieve this, but a good place to go for information on savings is Military One Source or your personal banking institutions web site.

Now to end where we began; total up all of your holiday expenses (trips, gifts, etc.). Take this total and add it to your savings budget, breaking up the total into 12 equal monthly installments. Then set-up an automatic allotment from your checking account for this amount, and have it sent to a separate savings account called "holiday fund". If you are disciplined about not touching this money for the entire year, you will have a truly happy holiday in 2011!

I hope our free advice helps you out. I know it can seem like an insurmountable challenge, but I know you can do it. All it takes is a little planning, and a lot of discipline for you and the entire family