By Tracy Scott
Once-in-a-lifetime experiences can create lasting memories with close friends and family members. This past summer was filled with laughter and nonstop good times with those you cherish. But, it also meant spending money eating out, paying for admission tickets, and buying a souvenir or two. While not every memorable experience has an associated price tag, a quick look at your bank account confirms that vacation season left a mark. This time, not in a good way.
If your savings fund is depleted due to expenses related to summer vacation adventures, don’t be discouraged. Those cherished memories and strengthened bonds will last a lifetime. Fortunately, it won’t take nearly that long to improve your finances after a season of overspending. Here are three steps you can take to increase your savings account balance and payoff expenses over the next several months.
Step 1: Refresh Your Monthly Budget
After a season of excessive spending, it’s time to assess the financial damage. Before taking action, you must take a financial inventory. Review your monthly budget and update it to include all required minimum monthly debt payments and any new seasonal expenses, e.g., childcare payments during the school year. Use a budgeting app to help define your fixed and variable expenses. Once you’ve determined how much money you have available after bills are paid, you can move to the next step.
Step 2: Request an Interest Rate Reduction
If your credit card is feeling the effects of overspending, you have options. If you haven’t missed any required credit card payments in the past 24 months, contact your credit card issuer to request a rate reduction. Making on-time payments not only contributes to a good credit score, but creditors will consider your payment history when granting a request for a temporary interest rate reduction. A lower interest rate can translate into lower minimum required payments. The goal isn’t to make a lower payment, but to make your regular payment and have more of it applied to the principal balance. These actions will reduce your debt in less time.
Step 3: Create a Debt Reduction Plan
To keep credit card and loan finance charges to a minimum and save money, eliminate your debt as soon as possible. Increasing your household income is the fastest way to recover from overspending and rebuild savings account balances. Here are a few options:
- Offer to work overtime at your current job
- Turn your hobby into a side business
- Secure a part-time job
Use your extra earnings to pay off your smallest debt first. Focus on paying off a single debt, while making minimum required payments on the others, can help keep motivation high. As you gain control over your finances, you’ll be more likely to stick to your plan.
Prepare now for the memories you want to make next summer and the expenses associated with them. Set a savings goal based on your recent experience. Sign up for automatic transfers from your checking account to a separate savings account – Club Savings Account, Money Market Account, or an Add & Earn Share Certificate. Watch your account balance grow through consistent, automated deposits and competitive dividends which are compounded and paid monthly.