Finance Globe

U.S. financial and economic topics from several finance writers.
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Recover From Overspending

Now that the holidays are over and the dust is settling, you may look at your bank account or check your credit card balance only to realize you spent far more than you intended to. It happens to many people every year and not just around the holiday season. What do you do when you realize you blew your budget? Here are a few suggestions.

Assess the damage. Maybe it’s not as bad as you think. Check your accounts and total up what you ended up spending. If it is as bad as you suspected, or worse, then you have to go into recovery mode.

Tally up the consequences. The worst part about overspending for holiday gifts or other expenses is that some of your other expenses may go unpaid. For example, you may have spent the money for your mortgage or electricity bill. Figure out how much money you have to come up with to get yourself out of the hole.

Put a hold on your extra spending. Until you resolve the issues caused by overspending, avoid making additional purchases that could worsen the problem. Instead, limit your spending to only the necessities, e.g. groceries, gas, bills, etc.

Return some things to the store. You can’t ask people to give you their gifts back, but if you purchased some things for yourself, you can return those things to the store for a refund. If you have a receipt, you’ll usually receive the refund in the same method that you paid. For example, you’ll receive cash back if you originally paid in cash. The returns that go back to your checking account can help you make your necessary monthly obligations.

Be careful. Returning items you purchased on your credit card is not equivalent to making a credit card payment. While your balance will be reduced by the amount of the return, you’re still required to make your regular monthly minimum payment.

Come up with extra cash. You may be able to sell some clothes to consignment, put items up for auction on ebay, or sell valuables via Craigslist to come up with some extra money in a short period of time. Look around your house for valuable items that can be sold quickly.

Wait for your next payday. If your overspending wasn’t too dramatic, you may be able to hold off on some expenses until you get paid again. Make sure you contact any billers that you won’t be able to pay on time; you may be able to get the late fees waived. Continue to keep your spending low until you recover from your bout of spending so you don’t put too much strain on your paycheck.

Dip into savings. It seems easier to just use money from a savings account or emergency fund to cover your expenses instead of returning items to the store or selling your valuable items. Think about this: if you wouldn’t pull money from your emergency fund to shop with, then you shouldn’t really use the fund to cover the expenses that come up after you’ve over-shopped. But, don’t drown if you have a lifesaver. Use your savings to cover your short-term needs, but replace the money as quickly as you can.

Pay off the extra debt as quickly as possible. If your overspending is in the form of a big credit card balance, come up with a plan to pay it off. Review your budget to see how much extra you can put toward the bill each month, then pay as much as you can.

Avoid credit card cash advances, payday loans, and checking account advances to cover your short-term needs. While these financial products are designed to help you with a temporary financial need, they’re more expensive than many other forms of borrowing. Not only that, short-term loans often create a dependency that can take several months to break.
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Thursday, 14 November 2019

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