Two of the biggest shopping days of the year—Black Friday and Cyber Monday—aren’t even here yet, but many people feel like they’ve already spent a small fortune on holiday gifts. If you’ve done a little too much shopping lately, you might feel like a typical binge drinker—you know, the guy or gal who chugs back one too many shots and regrets it the next day.
In both cases—with over-spending and excessive drinking—you’re sure to experience a peculiar hangover; it’s just that with too much shopping, you’ll feel something called a “financial hangover.”
Well, if you’re planning to leave your family on Thanksgiving night just so you can take advantage of a door-buster sale, and then if you find yourself shopping right up until Christmas day, you may start to feel some buyer’s remorse after the holidays.
The good news is, if that nagging feeling of regret does emerge, there’s a fix for your finances to help restore your economic sobriety. Here are three cures for a Black Friday, Cyber Monday or any holiday shopping hangover.
If you found yourself gorging on every possible deal in the toy section of your local Walmart, and you don’t even remember half of what you bought, it’s time to administer the remedy to what ails you.
Fortunately, you don’t have to take a pill or down some weird, nasty-tasting concoction.
The prescription to fix your financial hangover is simple: it’s that mound of receipts that are tucked away in your wallet, or contained in those hoards of shopping bags you’ve hidden away from the kids.
So here’s the deal. To get rid of your financial hangover, you’re going to go through those bags and separate “must keep” items from the “I really shouldn’t have” stuff.
Take the “I really shouldn’t have” things, throw them into the back of your car, and return them to the store or stores where you bought them. Immediately.
Do it now because if you don’t, those same items will be sitting around in your house for who knows how long. They might end up as “extra” gifts for people who probably don’t even need it. Or even worse, that merchandise will sit around in the back of some closet or your car trunk until it’s well past the store’s seven-, 10- or 30-day return period.
Then you’ll really be out of luck.
So you convinced yourself that you just had to buy that expensive gadget for your spouse or significant other, or that ridiculously priced designer bag for yourself, right? OK, fine.
Now it’s time to take a cue from the politicians: It’s time to figure out how you’re actually going to pay for the stuff you bought. It’s time to balance your budget.
Anything that cuts your budget is an offset to excessive spending.
So what are you prepared to slash? Perhaps it will be “bye bye Netflix for a year.” Or maybe you can offset your holiday spending and reduce your cable bill by dropping those 100 premium channels you’ve got.
It’s up to you to figure it out. But you absolutely must come up with a list of financial offsets that match or exceed the crazy amount of holiday spending you did.
Here’s your next cure for a holiday shopping binge gone bad: I call it payback.
Depending on how you look at it, the recipient of the payback is you, the bank that issued your credit card—or both of you.
First let’s deal with you: You’re the one who went out there and charged up untold dollars worth of stuff that you didn’t really need and probably couldn’t afford. Nobody put a gun to your head and forced you to shop. Therefore, it’s your responsibility to pay off what you spent.
So let’s just cut out the excuses and deal with reality, namely: How are you going to get rid of this debt so that it’s not lingering around come next holiday season? Consider the 3-3-3 payback strategy. As I’ll explain momentarily, two-thirds of this strategy applies to you. The final third is payback, so to speak, against the banks(s) that encouraged you to rack up unaffordable holiday debt.
OK, here’s your payback.
Start by tallying your total spending and dividing it by three. So let’s say you charged $900. That $900 figure divided by three is $300. So now you know that $300 is how much you have to pay each month to be rid of those credit card bills in three months.
What if you do so much damage on Black Friday or Cyber Monday that there is no possible way you can knock out your debts in just three months? Fine, let’s move on to the second part of the 3-3-3 payback technique.
This step calls for you to make a commitment to pay at least three times the minimum payments that you credit card company requires.
If your credit card has about $5,000 in outstanding debt, your bank is probably asking you to pay between $100 and $150 a month for your minimum payment. That’s because banks usually calculate your minimum payment at 2% to 3% of your total balance.
Is paying triple your minimum payment still not financially doable? Tough luck. Figure how to make it work. Go back and see strategy #2 above on offsets. Work in another offset or a series of offsets that would free up enough cash flow to allow you to triple your minimum monthly payment.
I don’t call this technique payback for nothing.
Now what about that bank or credit card issuer of yours? They did approve all those holiday charges, right? That’s fine. That’s how banks make their profit—by lending money to consumers. But that doesn’t mean you have to stay with the same credit card company if you’re not getting the lowest possible interest rate, or optimal repayment terms.
So here’s some “payback” for the banks.
Go dig through your mail right now and find a 0% balance transfer offer from any company. In fact, any low-rate deal will do, as long as it’s an interest rate that’s better the one you have.
Now call up three of your creditors and tell them you got a better deal from the competition and ask them to match or beat that interest rate. If they won’t budge, tell them they just lost your business.
Then follow through on your threat/promise and take your business elsewhere.
As you can see, by using these three strategies—returns, offsets and payback—you can help cure a holiday shopping hangover.