BJK Financial Group Blog

As the holiday season approaches people around the world prepare to celebrate in all special ways. Whether it’s lighting a menorah for Hanukkah, decorating a Christmas tree, gathering for Kwanzaa or simply enjoying time off with loved ones it’s all a time of togetherness we need to cherish. However, with all the excitement this season many will tend to overspend getting carried away in the holiday fun. While treating yourself and loved ones is great, overspending as a result of this can lead to financial headaches including credit card debt. The good news? Paying off credit card debt and being more mindful with holiday spendings can set you up for long term financial health. In this blog we’ll discuss the benefits of paying off that debt and a few tips and tricks to help you spend less. 

The Benefits of Paying Off Credit Card Debt

1. Save On Interest: The less debt you carry, the less you’ll pay in interest
2. Boost Your Credit Score: Lower balances and on time payments as well as your spending history are some of the key factors used to calculate your credit score. Having a good credit score will help you get approved for better interest rates and other loans such as mortgages. 
3. Investing In Your Future: The money you save from cutting down debt first can later be redirected towards something in the future such as finally being able to save for the vacation you've been wanting to take.

 How To Pay Off Credit Card Debt 

Now that we’ve presented the benefits of paying off that credit card debt, here are a few strategies on how we can do so. Before coming up with a plan to get rid of accumulated debt or figuring out how to avoid it, it’s important to understand how it came about. First you can start by going over credit card statements and find spending patterns and see if you can cut down on these expenses. Are there areas where you could cut back? Maybe cancel that rarely used gym membership or trade dining out for cooking at home. 

Choosing a Debt Repayment Method: Here are two ways to plan out your debt payments

• Avalanche Method: Focus on paying off the debt with the highest interest rate first while making minimum payments on other debts. Once that’s paid, tackle the next highest interest debt. This approach saves money on interest.
• Snowball Method: Start with the smallest debt first. Once it’s paid, roll the money you were using into paying off the next smallest debt. This strategy builds momentum and motivation.

Pay More Than the Minimum

Making only the minimum payment keeps you in debt longer and costs more in interest. Even small extra payments can make a big difference over time.

Cut Back on Spending

Create a budget to understand your income and expenses. By reducing unnecessary spending, you can free up more money to pay down debt. Try:

• Setting a Goal: Know how much debt you have and set a timeline to pay it off. A clear goal can keep you motivated.
• Tracking Spendings: Writing down how much you spend or even using an app or a simple spreadsheet could help keep you accountable and show you what your areas in need of improvement are.  
• Involving Others: By sharing your goals with either family members or friends they might also be interested in cutting back their spendings or just help you stay accountable and could be interested in trying more budget friendly outings. 

Debt consolidation

 If you're juggling multiple credit card balances at a time, consolidating them into one account could simplify things. There are different options like balance transfer cards or debt consolidation loans that often have lower interest rates, helping you save money in the long run. For example: if you transfer $5000 to a card with 0% interest for 18 months, paying $278 a month could eliminate debt before the promotion ends. It’s equally important to check whether the card has transfer fees and to check all other card terms and conditions before you apply.

Tips for Avoiding Debt in the Future

Once you’ve made progress on paying down debt, it’s important to maintain healthy financial habits. Here’s how:

• Plan for Seasonal Expenses: Set aside money throughout the year for holidays, birthdays, and other special occasions. This reduces the temptation to rely on credit cards.
• Build an Emergency Fund: Unexpected expenses like car/house repairs or medical bills can push you back into debt if you’re not prepared. Aim to save at least three to six months of living expenses as a cushion.
• Re-evaluate Wants vs. Needs: Before making a purchase, ask yourself if it’s something you truly need or if it can wait. 

Final Thoughts…

The holidays should be a time of celebration, not stress. By focusing on paying off that credit card debt and practicing smarter financial habits, you can enjoy the season guilt-free and set yourself up for success in the new year. It’s important to remember that small, consistent changes can lead to big results and can give you the freedom to focus on what really matters.