The holidays can be a time of respite and community—but it comes at a cost. A recent report by CouponFollow found that 25% of Americans shared their 2022 holiday shopping landed them in debt. Of them, 35% still haven’t paid off the charges made from over a year ago.
Don’t be too hard on yourself if you fall in that boat, because you aren’t alone. Right now, credit card in the US sits in the trillions, meaning that many of us are carrying large balances month-to-month. With that, it’s time to take your power back, and get your finances back on track. We tapped Financial educator, Millenial Money Expert, and the founder of My Fab Finance, Tonya Rapley, to break down some tips for tackling holi-debt for a better 2024.
The first step.
“If you over-spent during the holidays, there are ways to not feel overwhelmed. While looking back without judgment is important, planning for upcoming expenses should be equally prioritized,” Rapley tells ESSENCE. “Preparing to not incur unnecessary fees like overdraft charges, late fees, or additional incurred interest can dramatically impact your future financial standing. Consider doing a no spend January or February to focus on reducing your expenses and getting back on track. Technology and apps like EarnIn can give you a day-to-day view of your earnings and allow customers access to their pay in real time. This has helped customers pay bills on time, avoid additional debt, while continuing to manage everyday needs. Importantly, by having access to their money when they need it, over 80% of EarnIn customers reported it reduced their financial stress.”
How can we adjust to rising inflation while paying down newly obtained debt?
“The reality is over 60% of the country is living paycheck to paycheck and this is coupled with ongoing inflation rates,” Rapley says. “Determine if buying in bulk when you have the money saves you costs. Take every discount available to you even if it’s saving 10 cents per gallon when fueling up at the gas station. Consider doing a service yourself such as learning to braid your child’s hair yourself or doing your own pedicures. You can also try apps like EarnIn that give you access to your money as you earn it. EarnIn allows you to look at your budget and earnings daily. Always look for ways to cut costs and budget but also ways to decrease expenses. If you have a full-time job, assess whether a raise is an option or searching for a higher paying job is the solution. If you’re an entrepreneur, do you need to pick up additional work or add another service to your business that allows you to bring in additional income.”
Credit card debt is at an all-time high—How can we pay that down without taking out a credit score-damaging personal loan to consolidate debt?
“Credit card interest rates and personal loans come with fees that can cause customers to accrue more debt, while negatively impacting one’s credit score,” Rapley shares. “They shouldn’t be a first resort but a last resort. With that said, when interest rates improve, people have refinanced their home to pay off debt, sold investment accounts such as stocks, and taken extra jobs to eliminate debt. It might require that you get creative and or participate in the gig economy.”
She adds: “Thankfully, there are other low cost and low risk solutions that don’t come with high fees, interest or impact to one’s credit score. An option is same-day pay which allows you access to your money as you earn it. Because same-day pay is not a loan, there are no credit checks or credit reporting- it protects your credit score- and you can never access more than you earn, helping customers to avoid debt and extra fees, paying their bills when they are due.”
A large number of Americans are still in debt from 2022 holiday purchases. Do you have any advice for those whose goals have gotten off track?
“Over 50 million Americans have held credit card debt for over a year, and there is a lot of shame that comes with holding debt,” Rapley says. “With that shame can come anxiety about future finances. If your goals have gotten off track, evaluate your spending, evaluate your debt, and manage your everyday needs without incurring additional costs, fees, or further debt. Also, look at technology and apps such as EarnIn, which provide access to your money as you earn it, and can serve as a guidepost in your budgeting process. And lastly, define what getting back on track means for you in the short term and the longer term. Sometimes we need quick wins to propel us to the bigger ones and pull us out of a funk.”
“Assess whether or not you have goal trauma, what’s the hesitation of creating new goals due to the disappointment of not achieving previous ones. If you work with a therapist, this would be a good thing to explore. If you don’t work with a therapist, listen to podcasts on improving your relationship with money, those specifically focused on getting back on track. It’s hard to succeed at something you are fearful of or distrust.While some industries like gig-work or hospitality allow you to cash out on earnings from extra shifts the same day that you work them, other professions require you to wait until payday to see that additional income. Know that there is same-day pay technology that enables customers access to their earned income before a traditional payday and it can help people stay on track with their financial needs and goals.”
What are some tools we can use to help do the heavy lifting of financial management and debt eradication?
“A simple planner book can help you write out current expenses and plan for future ones. Organizing your finances does not have to be fancy. Having access to your bank accounts online will always be critical as well. EarnIn customers report being able to pay bills on time, avoid debt, and manage everyday needs. To date, they’ve helped millions of customers access over $20B in earnings, all while saving over an estimated billion dollars in fees. There are incredible new tools on the market that people should be evaluating and bringing into their everyday financial habits.”