PHOENIX — A new study from Lending Tree shows consumers spent a record amount and now, many of us have to get back on track financially.
A Valley expert shares 5 ways you can start fresh in 2023.
“For 2022, it was the record amount of debt for the average American,” said Andrew Johnson, who’s been working in the financial world for more than a decade, for the past two and a half years with TruWest Credit Union.
“So, we first need to understand where that came from and what kind of habits created that debt,” he said.
All too often, he says the holidays hit and send people backward financially, leaving them in a hole to dig out of.
“Yes, people get click happy,” he said. “It’s impulse spending.”
And this year, even more so: 35% of people took on holiday debt in 2022. On average? $1,549.
“A lot of us really love that feeling of giving and it was the holiday season, we went through a crazy 2022 so we overspent, and we felt that joyous feeling,” Johnson said.
At the start of a new year, with interest rates and inflation at an all-time high, now is the time for people to take stock of their budget, debt, and investments and check them against their financial goals.
“Now we have to come back and reassess,” he said.
His best tips for digging out of that holiday debt and establishing good financial strategies for the new year?
1.) Break the habit: Overspending and impulse shopping can contribute to weigh you down financially. Identify the triggers that started the overspending in the first place.
“Are there any big-ticket items that we can just unload?” he said.
2.) Assess and revisit: Assess the extra debt you accumulated during the holidays.
“A lot of retailers have extended their return policies, so can we get those returned and either use that store credit for something we need like eggs, or can we use that to pay down that debt?” Johnson said.
3.) Tackle that debt: Now that you have additional debt down to a number, revisit your budget, adding that number in. This may be a time to sacrifice those morning coffee shop runs or learn how to do your own nails.
“The hardest part is starting that budget in the first place, peeling back the onion making you want to cry, but you’ve got to look at the numbers,” he said.
4.) Set financial goals: Set savings goals, so you don’t end this year with the same problem of overspending.
Johnson says it’s important to have a few bucks directly transferred to your savings account to start building your savings early for next year.
5.) Stay diligent: Any time your expenses or income changes, so should your budget. Revisit it often to make sure you’re staying on track.
“We would like to pull from our savings and not be in debt in the first place,” he added.
If you follow those steps, you can be sure your pocketbook will look much different this time next year.
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