How to catch up financially after the holidays

Everyone has a financially rough holiday season from time to time. You know what I’m talking about:

You were so excited that you found the right gift for your spouse or partner, so you splurged a little bit. Then, you realized that if you splurged on that person, you might need to overspend on gifts for other family members to make everything equal. Your kids wanted an extra-big gift from Santa, and you didn’t have the heart to disappoint them – because how many more years will you get to have the magic of Santa and Christmas morning? That’s not even taking into consideration the higher electric bill, slew of holiday happy hours you attended, and the added cost of unexpectedly hosting Thanksgiving at your house (even though it was your sister’s turn).

Now we’re staring January down. Did you overspend? Some of us are starting the New Year a little behind on bills, and kind of freaking out about it. (Read: majorly freaking out.) Before you spiral any further down, stop. Take a breath. You can handle this.

Playing catch up after a particularly spending-heavy holiday season can be challenging, especially if you’re far enough behind that you’re worried about missing payments.

The good news is that it can be done! You just need a little bit of help getting started.

Hit the reset button

First thing’s first: you need to hit the reset button. Beating yourself up over how the last few months of the year went isn’t going to help your current situation and your bills won’t be magically paid just because you feel really guilty about overspending.

Research has shown that anxiety short-circuits your decision-making process. As your stress levels climb, your ability to effectively create an action plan to get yourself out of this financial predicament plummets. So, take a moment to feel the guilt sitting in your gut, then shake it off. It’s time to turn the page and start fresh for the New Year.

Purposefully assess the damage

After you choose to move forward and leave the beating-yourself-up behind, you can start to assess the damage. Take a second to remember where you stood before the holiday season. Here are a few questions to ask yourself:

How much did you have in savings?
What type of credit card debt were you previously carrying?
What did your monthly spending look like?

This might mean pulling your old bank statements from the months leading up to the holiday season to get a realistic view of the damage that was done in November and December.

Once you’ve gotten a solid “before” snapshot, take a look at your “after” to determine what’s different. Questions to ask yourself here are:

Did I take money out of my savings account to cover unexpected holiday expenses?
Am I carrying a balance on my credit cards?
Have I fallen into bad overspending habits that are carrying over into the New Year?
Am I short on cash flow to pay back the credit card debt I’m in now?
Am I going to miss payments on any of my other bills?

Do this step without self-judgment. Right now, you’re just gathering information so that you can move forward to creating a strategy.

Prioritize financial obligations

Once you know exactly what you’re dealing with, you can prioritize what problem to tackle first. Every situation is going to be a little bit different. Typically, a good first step is making sure there’s enough cash flow to pay your bare-bones monthly bills. To do this, you might need to reevaluate your current budget.

In what areas are you overspending? Are you still eating out 5-6 nights a week because it became a habit during the busy holiday season? Do you find yourself sneaking extras into your shopping cart that you and your family don’t need because you’ve been in gift-buying-mode for too long? Taking some time to reassess what’s going on with your spending can be a huge help as you start to clean up some of the financial damage you inflicted during the holidays.

Then, you can look at any consumer debt you took on. This means tackling your credit cards full force once you’ve reset your budget and have the cash flow to support paying them down. Any bonuses you receive in January should go toward paying down this extra debt. If you were already in debt before the holidays, it’s tempting to believe that a few extra hundred (or thousand) dollars won’t be a huge detriment – but this couldn’t be farther from the truth. Any amount of consumer debt hurts your long-term financial goals, so prioritizing paying off this new debt (and your old debt) in the new year is important.

After that, you can focus on repaying yourself. Did you dip into savings to cover expenses during the holidays? It’s time to replenish your savings fund. I recommend having between six and 12 months of living expenses stored away. If that sounds big, start with one month, and then work towards three. Start by rebuilding what you took out of the account last year, then keep growing it from there.

Do a financial autopsy

It sounds corny, but setting money-related New Year’s resolutions might take some soul searching. Too often, we beat ourselves up for overspending during the holidays, but we don’t investigate why it happened. Usually, one of two things was true for the overspending to occur in the first place:

We weren’t prepared ahead of time for the holidays, or
We weren’t feeling satisfied with how our money was spent during the year, so we went overboard to find that fulfillment, using the holidays as a convenient excuse.

Not being prepared for the holidays is an easy fix – you can start saving for holiday expenses as early as January. Setting aside small increments each month can help you build a rock solid holiday fund. You can also set a holiday budget ahead of time that clearly defines your parameters and keeps your expenses in check.

However, feeling unsatisfied with your finances is a different problem that also needs to be resolved. Were you on too strict of a budget last year, so holiday spending felt like the release of the pent-up need to treat yourself? Were you spending your money in a way that aligned with your values, or were you spending in places that didn’t make you feel satisfied and happy? Unsatisfied holiday spending can crop up for a number of different reasons, so make sure you take some time to think about what went wrong this past season – and set out to do it differently next time around.

Set financial goals for the coming year

If you overspent this holiday season and are left with a credit card bill or depleted savings account in the aftermath, you’re already feeling pretty guilty. As much as feeling stress over past mistakes won’t help you move forward, you should use that guilt to motivate you to set new goals to do better this year.

The holidays might feel like they come out of nowhere, but the truth is that they come at the same time each year. We know they’re coming, we just fail to prepare for them.

Make this year different. As you’re setting goals in January, evaluate how you want your holidays to feel next season. Set spending (and saving) goals for yourself throughout the year that will leave you feeling fulfilled and negate the need to spend at your maximum comfort level next holiday season.

Do some careful thinking and planning with your family about how you want your life (and holidays) to look and feel – then set money goals that support that vision. You’ll find that you’re much happier, your family will be content without feeling the need to overspend, and you won’t be experiencing the same financial regret!

It can also be useful to use this feeling as a launchpad to make some bigger, overarching financial goals for yourself this year. Working with a financial planner, for example, to set up a cash flow system and get a handle on your long-term financial goals is a fantastic New Year’s resolution.

You might also look into saving a specific amount for retirement, paying down your debt, or making sure you have the right amount of life and health insurance at a rate that fits within your budget. The New Year is a fantastic time to evaluate your comprehensive financial life – using your past mistakes as a guide for what you want to avoid this year, and for years to come.

Mary Beth Storjohann, CFP® and Founder of Workable Wealth, is an author, financial planner and accountability partner working to help clients in their 20s-40s across the country make smart, educated choices with their money. Her recent accolades include the “Top 40 Under 40” by Investment News, “10 young Advisors to Watch” by Financial Advisor Magazine, and “10 of the Best Personal Finance Experts on Twitter.” She frequently appears on NBC as a financial expert and her expertise has been featured in The Wall Street Journal, CNBC, Forbes and more. Opinions are her own.

Haven Life Insurance Agency offers this as educational information. Haven Life does not offer investment or tax advice and encourages you to seek advice from your own legal counsel, investment advisor, or tax professional.