About Delta Trust Delta Trust News Archive

Seeing Red This Holiday?
By Chad Carlson

The average American not only put on a few extra pounds this Holiday season, they also packed on some extra debt. Couple the increases in spending with higher travel costs and the red that many are seeing isn't Santa. If after a quick self-diagnosis you find that you've overdone it this holiday, you're not alone. The good news is that your condition is not life threatening. The bad news is that it could be. Take immediate action and follow a plan for good financial health in 2006.

Pay off your credit card.  If you splurged on the new plasma, flat-screen TV this year because of the 0% interest for 18 months, watch out. A lot of folks take advantage of the post-holiday grace period; however, sometimes even the best intentions of paying off the card can be derailed by unexpected expenses. Next thing you know, you're carrying a balance. If you applied for a store-issued card to obtain a discount on your initial purchase, be aware that the interest rate on those cards can exceed 20%. If you have the money, pay your balance off now and next year, leave your credit cards at home and pay with cash, check, or a debit card.

Search for a lower APR. If paying off your balance isn't an option, and you're paying the average credit card interest rate of 13%, look for a card with a lower annual percentage rate (APR). Many credit card companies offer promotional rates, some as low as 0% for six months to a year. Find the company with the best rate and consider transferring your balance from your higher interest rate card. If you do this, close the old high-rate account and cut-up the old card.

Set a goal and stick to it. The average American spent over $1,000 on holiday gifts this season. If you charged just $500 on a card with an 18% interest rate and made just the minimum payment each month, it would take you seven years - and cost $365 in interest to pay it off! Look at your 2006 budget now to determine how much you can afford to put towards your balance each month and pay as much as possible.

If the damage is already done, set up a strategy to pay it off within three months. This will involve sacrifice. Without a budget, you can't plan. While t here are hundreds of books, magazine articles, and Internet web sites about budgeting and getting out from under credit card debt, many still need additional help. One factor that often goes unaddressed in discussing debt is how you got there in the first place. While addressing these issues is often unpleasant, if you don't, you may never gain control over your finances. Just as you schedule an annual physical with your doctor, a meeting with your financial and tax advisors is important in developing a plan customized for you.

Create a budget ahead of time. Y our 2005 spending provides a starting point for your next year's expenses. Add up your receipts and review your credit card statements to help you determine a budget. Be sure to factor in the cost of gifts, entertaining and parties, travel, cards and postage, and decorations. Set limits for your holiday expenses but remember that following a budget and saving money isn't just for the holidays.

If you have a large family to shop for, make a list and include possible gift ideas and research the costs associated with these gifts. If you are spending more than you should, talk with family members to see if setting a dollar limit or drawing names is preferable. As the old saying goes, it's the thought that counts.

Save now. Advance planning can help you keep all of your holiday expenses under control. Look at your holiday spending as you would any other large purchase. Don't make a big-ticket purchase without doing your research. By planning and shopping early, you can take advantage of pre-season sales and avoid the last-minute shopping crunch. These simple steps can help you to stay within your budget.

The New Year is a time for new beginnings. Make this New Year's resolution a commitment to learn from last year's mistakes and work towards a brighter, debt-free future. Take the steps today to ensure that you and your family are on the path to a financially sound 2006.

Chad Carlson is a Financial Advisor with Delta Trust Investments, Inc. For more information, contact Chad at (501) 975-4010 or by email at ccarlson@delta-trust.com. Delta Trust does not offer tax or legal advice and recommends that you consult your tax or legal advisor.