How a New Year's Spending Fast Can Help You Get Back on Track Financially
Suffering from holiday debt hangover? Here's how a spending fast in the new year can help you get back on track with your finances.
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Inflation got you down? Are you feeling the pressure of holiday gift-giving and spending? If so, you're not alone. According to a Deloitte survey, U.S. consumers plan on spending $1,652 over the holidays—a 14% year-over-year increase from 2022.
And as you feel the pinch of getting less for more, you might be racking up some debt on your credit card.
Enter the holiday debt hangover. It happened, the deep regret of going overboard is sinking in, and now you're saddled with a credit card balance you wish would've disappeared tomorrow. Not to fret. Here's how a spending fast in the new year can help you get back on track with your finances.
Come up with rules for your spending fast
For the unacquainted, a spending fast is when you hit the "pause button" on your spending. There are no hard and fast rules, and how you want to go about it is entirely up to you. That being said, here's one way you can go about it:
- Commit to not spending either during the weekdays or weekends.
- Set a time frame (e.g., two weeks, a month).
- Set parameters on what you can spend money on (e.g., groceries, personal items, gas for car).
- Allow yourself to spend with gift cards you already have.
- If you spend money on non-essentials, such as a birthday gift, set a limit (e.g., $25).
- Unsubscribe to social media accounts and newsletters.
- Give yourself a "jail-free card" once a month or so, to make it more manageable.
Freeze your cards
Yes, this might be a scary thought. But consider freezing your credit cards, which blocks you—or anyone else, for that matter—from using your credit card. Many card issuers let you do this for free and with a click of a button on your app. When you attempt to spend fast, it can prevent you from any spending temptations.
Besides putting a lock on your cards, you can unlink your credit cards from your digital wallets or delete payment platforms and digital wallets altogether. Why? As they say, it makes it easy to do the right thing and hard to do the wrong thing. So, if you're trying to avoid unnecessary spending, add some friction that makes it harder for you to use that plastic.
Note that this is different from freezing your credit, which you need to do with each of the consumer credit bureaus. A credit freeze prevents any party from accessing or viewing your credit.
Focus on paying off your card balance
While you're on your spending freeze, consider going hard on repaying your debt. To start, gather three tidbits of information on each of your cards:
- Creditor
- Balance
- APR
- Payment due date
Then, aim to pay off your cards as soon as you can.
You can employ several different popular holiday debt payoff strategies, such as:
Debt snowball or avalanche. With the debt snowball method, you start by paying the debt with the lowest balance. Once that's paid off, you focus on the next highest balance and continue until you've paid off all your credit card debt. Alternatively, the debt avalanche method is where you start with the highest amount. Once that's been paid off, you focus on the next largest debt.
Balance transfer card. The balance transfer card method involves moving your existing debt to a new credit card with a zero percent intro APR. The key is to pay off your balance before the zero-interest APR ends. In turn, you'll save on interest fees. There are fees involved, and it's usually a percentage of the balance you're moving.
Debt consolidation. When you consolidate your credit cards, you're essentially taking out a new loan to lump all your credit cards into a single payment. Instead of making individual payments to each of your creditors, you make one payment to the lender. Not only does this simplify payments, but you'll get a lower interest rate, which helps you save on interest.
Each method has its pros and cons and trade-offs, so it's important to carefully look at each option to see which might be the best fit for your needs and situation.
Autosave, autosave, autosave
During your spending fast, see about setting up an automatic savings plan. If you already have savings accounts, increase the amount a few notches. For instance, if you already put $25 a week toward your emergency fund, consider bumping that weekly savings amount to $40.
Another way to see how much you can reasonably set aside for savings? If you average $200 a month on discretionary expenses (i.e., clothing, going out, eating out), then autosave $50 a week.
Do regular check-ins
Whether you commit to a two-week spending fast or a three-month one, it's important to check in with your progress regularly. Have you been able to stick to your rules? If not, what do you think is making it hard for you to curb your spending? Consider making minor tweaks that will ensure you stick to your spending fast.
For instance, are you shopping out of boredom, stress, or anxiety during working hours on your computer, or are you tempted to splurge when you see someone on social media with a cool fit or gadget? It might be hard to say no to social outings. If so, consider committing to your fast during the weekdays.
The ultimate goal of a spending fast isn't just to get you back on track financially. It can also help you learn about the why behind some of your money habits. Committing to spending fast in the new year can lead to long-term changes and could help you avoid falling into holiday debt hangover.
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Jackie Lam is a personal finance writer whose work has appeared in Salon, Business Insider, and GOOD.