The first workday in January after the holidays hits a little bit differently: The parties are over, debt payments are soon due and it can feel like there’s nothing to look forward to.
You may be able to minimize the doldrums with some planning and other steps to turn things around, financial experts say.
“Financial stress can be temporary,” says Tonya Rapley, financial educator and founder of the millennial money and lifestyle blog My Fab Finance. She suggests focusing on small steps such as paying this month’s bills, then reminding yourself that you can recover from December’s overspending.
Here are a few more ways to fight this month’s financial downers:
MAKE OR UPDATE A BUDGET
The new year is a great time to create or update a budget, which can give you back a sense of control, says Mike Croxson, CEO of the National Foundation for Credit Counseling, a nonprofit financial coaching organization.
The popular 50/30/20 budget, for example, suggests putting 50% of your take-home income toward needs, 30% toward wants and 20% toward savings and any debt payments. You can adjust those percentages as needed, especially if you live in an urban area with high housing costs.
“The best way to get control back is to make a plan,” Croxson says. “You can get back on top of this and back to where you feel good about your finances.”
PAY OFF DEBT
With interest rates higher than they were a couple of years ago, credit card debt is also more expensive, which makes paying it off a financial priority. How exactly you do that is up to you, Croxson says.
“Paying off the highest interest rate balance first makes the most common sense, but for some people, paying off the smallest dollar amount first is most important because they feel like they accomplished something,” Croxson says. Small wins can give you momentum to continue.
Online calculators for those two methods, known as the avalanche and the snowball, respectively, can help you stay on track.
TRACK YOUR PAYMENTS CAREFULLY
If you purchased holiday gifts using “buy now, pay later,” which allows shoppers to split payments into multiple installments, then it’s important to note when those bills are due, says Christine Alemany, chief marketing officer for i2c, a global banking and payments platform.
Alemany suggests tracking your buy now, pay later due dates with a financial management tool or spreadsheet to avoid late fees or interest charges. “The variety of payment methods that consumers now have gives them the option to choose what’s best for them,” she says, but “that convenience needs to be balanced by discipline.”
BUILD UP SAVINGS
Amid all of that repayment, it’s also important to find a way to save money, Croxson says. “Having a savings line item in your budget is a critical step for virtually every consumer, even if it’s $20 or $25 a month,” he says. “There will be an emergency, and you will need it.” Being able to turn to savings in the future also helps you avoid building up debt again, he adds.
The good news for Americans is that positive signs in the economy, such as a slower rate of inflation and lower gas prices, means it’s a little easier to find room for savings, according to Alan Gin, associate professor of economics at the University of San Diego’s Knauss School of Business.
With gas prices coming down, Gin says, “not only will consumers be more confident, but they will have more money.”
KNOW YOUR RIGHTS
If an expensive item you bought or received as a gift in December breaks in January, that’s another potential downer, which is why knowing your refund rights is critical, says Wayne Hassay, partner attorney for LegalShield, a legal services provider. He suggests keeping track of all paperwork related to the item and any warranty attached whenever you make a big-ticket purchase.
In some cases, paying with a credit card can give you additional protections, he adds. And if your pricey new electronics break, don’t hesitate to follow up with the retailer or brand until you get a satisfactory response, which could be a refund or a new product.
GET HELP IF YOU NEED IT
Working to pay off debt and get back on budget in January can feel lonely because it’s such a solo activity, which is why it’s helpful to reach out for additional support, whether that’s from financial professionals or friends and family.
“Be honest with people,” Rapley says. She suggests sharing in a friend group chat if you are looking to scale back and spend less, because you’ll likely find encouragement that can help you stay on track. “That communication is definitely important,” she says, and can help you feel less alone — and with more good things to anticipate in the year ahead.
RELATED LINK:
NerdWallet: Monthly 50/30/20 budget calculator
Kimberly Palmer is a personal finance expert at NerdWallet and the author of “Smart Mom, Rich Mom.” Email: kpalmer@nerdwallet.com. X: @KimberlyPalmer.
