Don’t let Christmas debt hang around until spring

The Christmas tree is put away, but more reminders of the holiday are starting to pop up in your mailbox — the credit card bills.

Shoppers who put all or even some of their holiday expenses on credit cards may be regretting it right now, said Karen Joyner, a certified public accountant who currently works for the Foodbank of Southeastern Virginia. But there is some advice those people can use to get out of that debt trouble — and not get back into it next Christmas season.

Joyner recommended first making a list of all your debts — even those that are not holiday-related. Then, she said, the next step is to prioritize.

“You really want to pay off that high-interest credit card debt, or else you’ll never pay it off because it will continue to compound interest,” she said.

Also, she said, avoid paying only the minimum balance. All that does is make money for the credit card company.

“If you only pay $10, you are going to owe a lot more in the end, which they would like,” she said. “You want to eat away at the debt itself and not just the interest that’s accumulating.”

Joyner recommended paying at least four or five times the minimum balance each month.

Finally, to avoid getting in trouble again next year, Joyner said, “Cut up the credit cards so you’re not tempted to use them.”

She recommended using cash or debit cards. People also should look at their income tax withholding to ensure they’re paying what they owe throughout the year, she said. Getting a big refund only means you’ve given Uncle Sam an interest-free loan all year.

“The closer you can come to paying what you owe throughout the year, the smarter you can be throughout the year,” she said.

If debtors really feel they’re in trouble they can’t escape from on their own, Joyner recommended the non-profit Consumer Credit Counseling Service. People should steer clear of other companies, most of which are looking to improve their own financial situation rather than yours.

The Virginia Society of CPAs also recommends the following steps to get on the right financial foot to start the new year:

• Make financial goals and create plans to meet them.
• Build a better budget. Make a list of your expenses, deduct them from your income, and you’ll see where you stand in black and white. You may need to trim some expenses to be sure you have enough to live within your means and still contribute towards your future financial goals.
• Create an emergency fund. Experts suggest setting aside three to six months of living expenses.
• If you don’t already own a home, save for a down payment. You need to be prepared to make a down payment of 10 to 20 percent.
• Don’t forget about retirement. If you don’t have one already, open an individual retirement account. And maximize your contributions to your 401(k) if your employer offers to match them.
• Review your income tax situation and estate plans.
• Be aware. Keep your credit history clean, pay attention to your credit reports and know when something changes. Make it a resolution to check your credit reports at the beginning of each year. Keep a close eye on your bank account statements and credit card statements so you know when something is amiss.