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Steps to financially recover from the holidays

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Are you feeling worse for wear as a result of holiday overspending? You're not alone.

In fact, over one-half of consumers say they spend too much during the holidays, according to a 2016 survey by credit reporting company Experian.

"When the glow of New Year's Eve wears off, many of us wake up with the financial equivalent of a hangover," said Carla Dearing, CEO of SUM180, an online financial planning service. "We've spent too much over the holidays and feel discouraged about our chances for improving our finances in the new year."

If you spent more than you expected, you might be starting 2017 off in a financial hole. Don't feel discouraged, though.

Here are several steps you can take to get your money back on track.


Start by assessing the financial damage. "Look at your credit card and bank statements to see where the bleeding took place over the holidays," said Brandon Hayes, a certified financial planner with oXYGen Financial. "Most financial institutions have reporting tools on their website that allow for easy access to this data to allow you to analyze your spending categories."

If you're married or have a significant other, your partner should also examine his holiday spending. "If you didn't set a holiday spending plan with your spouse or family members, then it might be an eye-opening exercise," Hayes said.

Add up the total amount of credit card debt owed or the amount drawn from savings. "Just gathering the data and seeing it in one place will empower you to better align your spending to your priorities and zero in on ways to save," Dearing said.


Next, it's time to create a plan to pay down your debt, rebuild savings or get back on track. You will need to assess your overall money situation and what you would like to improve in the new year, said Michael J. Hardy, a financial planner with Mollot & Hardy.

"Many people don't pay much attention at all to what they are saving and spending -- all the while, hoping and dreaming for a stable financial future," he said. "This doesn't happen without the proper financial planning and follow-through, which all starts with simply being honest about where you stand financially."


To free up more cash to recover from holiday overspending and get your finances on track, Dearing recommends identifying two regular monthly expenses that you can do without -- and eliminating them. "For one person, these may be premium cable and a too-generous data plan," she said. "For another, they may be extra spending on eating out. The point is to be mindful and intentional about where your money is going."

If you have holiday debt, increase monthly credit card payments by the amount you save from cutting unnecessary expenses. Set up automatic payments for the beginning of the month so the money comes out of your checking account before you have a chance to spend it on something else.


You might be able to recover some of the money you spent during the holidays by taking advantage of retailers' return policies. "Did you make an impulse purchase that you regretted?" Hayes said. "Try and return that item if you bought it for yourself."

Nearly 60 percent of consumers planned to make purchases for themselves while holiday shopping in 2016 and spend an average of $139.61, according to the National Retail Federation. Luckily, many retailers have generous return policies that give consumers up to a year to return items. Even if you don't have a receipt, some stores can track down purchases made by debit or credit card and give you a refund.

Even if you don't have items to return, you might be able to get cash out of the holidays by selling any unwanted gift cards you received. You can sell your gift cards on sites such as and get paid up to 92 percent of the card's face value. Be sure to put any money you get toward debt repayment or savings.


To get out of holiday debt, make sure you don't go deeper into debt in the new year. "Cut up credit cards or department store credit cards that may have caused you to lose control of your holiday spending goals," Hayes said. "The less credit cards you use, the easier it will be to track where your money is going."

However, don't close the accounts of the cards you cut up if you pay them off because this could hurt your credit score. Your score is based, in part, on your credit utilization ratio -- the percentage of your available credit that you've used, according to, the consumer division of credit scoring agency FICO. If you close accounts, you lower the total amount of available credit you have. That will work against you if you are still carrying a balance on other cards because your credit utilization will increase if you lower your available credit.


The Experian survey found that nearly one-third of consumers who had unexpected expenses in the holidays racked up debt as a result. Whether you have holiday debt or other debt, it can keep you from building savings and improving your finances, Dearing said.

To tackle it quickly, she recommends setting a goal to make double payments on your credit cards for four months. "You may have to sacrifice small luxuries to do it, but you'll make a big dent in your credit card debt," she said. "It will feel amazing, and you'll see money being freed up for other things -- like increasing your 401(k) contribution."


A survey by T. Rowe Price found that 14 percent of parents have used emergency funds to pay for holiday spending. However, the purpose of an emergency fund is to have cash to cover unexpected expenses -- and the holidays are far from unexpected. If you tapped your fund, you'll need to quickly rebuild it so you don't have to rely on credit if a real emergency occurs.

"Your goal should be to have six months' worth of expenses in a readily accessible account for unexpected expenses," Dearing said. "Start by quickly replenishing at least two months' worth of expenses."

The key to reaching this goal is setting up automatic transfers from checking to savings so you're not scrambling at the end of the month to figure out how to come up with extra money to set aside. "You may be surprised by how doable this is," Dearing said. "And you'll feel a lot better, knowing you're prepared to handle an unexpected expense."


The T. Rowe Price survey found that 11 percent of parents have tapped retirement savings for the holidays. Withdrawing money from a retirement account will hit you with a triple whammy: a tax bill, a 10 percent penalty on the early withdrawal and loss of compounding interest on those funds. Even a withdrawal of a few hundred dollars could result in thousands less in savings at retirement, according to T. Rowe Price.

To bounce back, you need to boost retirement account contributions in 2017. In fact, those who didn't raid their 401(k) for holiday spending also should boost savings. "Most of us are not maxing out our contributions, but it's the simplest and most painless way to save for retirement," Dearing said. "If your contribution increases your employer match, that will be basically free money. Don't miss out."

The majority of employers that offer 401(k) plans will match employees' contributions -- typically $1 for every $1 the employee contributes, up to 6 percent of the employee's annual income, according to Financial Engines. But one-fourth of employees don't contribute enough to receive their full match and, as a result, leave an average $1,336 of free money on the table.


To avoid ending up with another financial hangover in 2018, use your holiday spending data from 2016 to plan ahead for the 2017 holidays, Hayes said.

"Agree well in advance on a maximum dollar amount for your spouse so you aren't trying to one up each other," he said. "Decide on a dollar amount for each family member, or better yet, pick a family member to shop for so you aren't stuck buying 10 gifts. More families today are experiencing the stress of the holidays so don't be shy of bringing this topic up with the rest of your family."

If you know how much you plan to spend for the 2017 holidays now, you can start setting aside a little each month in savings. Then, you'll have enough cash by the time the holidays roll around that you won't have to rack up debt or wreck your finances again to cover spending.


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