The Aftermath of the 2020 Holiday Season
The holidays of 2020 have come and gone in what seems like a blink of an eye. Although the holidays rush over us in a blur, digital images captured in a flash of those moments we found most dear will help those memories stay alive for years to come. Was all the fuss and excitement building up to the holiday season worth the work and wait? Despite the extraordinary circumstances we had with covid-19, I'd say it was worth it all, nonetheless. My parents, however, would disagree. They couldn't have the big family get-together in one place which they longed for and desired. It didn't happen with the risk of group gatherings being all too great and strict travel guidelines this year. My husband, two kids, and I still managed to celebrate the holidays with great joy and excitement in a different way than usual.
The coronavirus pandemic gave us time to pause and reflect on those who matter most to us and recognize just how special they are. We appreciate each other more and don't take things for granted as quickly as before. When faced with the need to find new ways to share our love and affection, we had to get creative. Whether it was a group Zoom call catching up with friends and family or exchanging gifts from afar, we still tried to keep the yearly traditions alive. We look forward to including the "norm" like making gingerbread houses, while others we dread but honor every year. One family custom in my household that we consistently do but don't necessarily enjoy - wearing individually crafted hats made out of doilies in the most creative ways to place on our heads for a silly family photo. I must thank my grandma for this one. She started this ridiculous activity some 20 years or so ago. It was a challenge to carry out all the traditions in 2020, but we settled on making those we could manage and do. We also took time to fondly reminisce over past holiday happenings we'd have to miss.
Challenges we faced with a year like none before.
We still had fun decorating gingerbread houses but then "suffered" the usual unfortunate consequence of eating them, too. The waist on my pants is pinching my mid-section most uncomfortably. How did this happen? I ask myself why. I know the answer, but of course, I do! Who wants to admit and take full responsibility for having lost self-control?
Another unfortunate result of the holidays, in my case, was the realization of having spent too much. I overindulged on gift buying, food, and decorating the house -both inside and out. I'd gone over budget during the last couple of months leading up to the holidays. I ask myself again and again how I let this happen, but sadly I'm not alone. A few recent surveys I found while researching what I can do brought some staggering results to light. Just over half of the participants felt pressured to spend more money on holiday gifts this past season than they were comfortable with, while nearly a third admit to ending up having overspent. Were you one of them?
Who wants to greet the new year in debt?
A new year should be a good thing, filled with promises, fresh starts, and beginning with a clean slate. I wish that were my new year, but unfortunately, it is not. It will probably take me two to four years to pay down the credit card balances I currently hold at high-interest rates. Did you know the average household debt runs around $9,000? I've realized with all the money I spent; I'll wind up paying even more for it all in the end. I'm now paying a higher price for those items as they accumulate interest over the time it takes me to pay it all off. The longer I carry any balances I owe won't help me get my finances under control.
Have an "interest" in learning how to gain back control?
There's no easy way out or special magic spell to make debt disappear. I desperately wish there were! Having to monitor and stay on top of multiple accounts is overwhelming and stressful. Only making minimum payments won't get you too far to make a quick recovery from bills that accumulated during the coronavirus crisis. My goal is to reduce the financial burden and minimize stress. I'm trying to figure out the best possible solution to the predicament I find myself in. A personal loan could combine those lofty debts into a single account at a likely lower interest rate. Yes, I use the term "likely" in referring to lower interest rates because interest rates offered are not all the same for everyone. They are dependent on your credit history and ultimately come down to credit scores. The higher a credit score, the lower the interest rate for borrowing funds. Missing payments and carrying large balances of money owed over a long period can get you in deeper debt and hurt your credit score. That's even more reason to get financially back on track and keep your finances under control.
A personal loan has you commit to making fixed monthly payments until you reach the end of an agreed-upon term. Personal loan terms can run as short as 1-year and even longer as needed. Choosing a repayment period you can stick to depends on how much you can afford in making set payments each month. The shorter the term you can commit to and the more you can pay each month, generally, the lower rate offer you receive, and less you pay back in added interest.
It comes down to the numbers.
I cumulatively owe a little over $9,000 on my current credit/store card balances, which is oddly enough in line with the previously mentioned average household debt. If I can commit to paying off my high-interest credit cards in 12 months at 16%, the current median interest rate for credit cards, my monthly payment would be $817. I can't afford that each month! If I consolidate my credit cards into a single personal loan at a rate of 5.99% for a 12-month term, it will reduce my monthly payment to around $775. While a payment amount of $775 is less than $817, my budget can't afford that either. A shorter loan term means a higher monthly payment. If you don't have the means to meet that payment amount comfortably each month for a year, you should extend the term. Adding a year or two to a personal loan's repayment timeframe is more realistic and manageable.
Sound financial advice cautions people to avoid placing more pressure on themselves by creating even more strain on their budget. You could run the risk of coming up short for a few months' payments or missing some payments altogether. A sizeable monthly payment looming in the shadows is no place anyone wants to find themselves in. When setting a plan to rid yourself of your financial woes, you also need to make sure you're not repeating the same vicious cycle with overspending again. The habit of running credit card balances up when you're trying to pay them down is counter-intuitive. So, in my case, I've decided I'm better off taking a bit more time to pay off my debt conservatively without adding any further undue strain to the predicament I find myself in. Shown below is a rate and payment comparison table that highlights the figures outlined.
*APR=Annual Percentage Rate
Larger payments made in a short period isn't necessarily productive in helping speed things along. The situation can quickly get out of control and potentially go from bad to worse. Not meeting required monthly payments can severely destroy the steps being taken to recover. A few minor "mishaps" will steer you in the wrong direction and cause more harm than you may know. These struggles will do a number, no pun intended, on your credit score. Your score will drop and ultimately decrease your chances of being offered the lower interest rates. You wouldn't want to take the risk with so much at stake, would you?
You can check out MIT Federal Credit Union's personal loan rates and apply today by visiting our personal loan web page here. MIT FCU has several online financial calculators to help you determine what's right for you.
I feel better with a debt consolidation plan in place, knowing I'll be able to get back on track and keep up with my bills with fewer accounts and due dates to remember. I can breathe a sigh of relief now, having a single personal loan at a low fixed rate and paying off my total debts in less time than I thought possible. With a stricter hold on my purchases next time and knowing how to manage my credit cards better, I'll be ready to start the next year off right with hope and faith for more fantastic futures in sight!
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