You might feel that post holiday burn on your wallet.
In order to give those perfect Christmas gifts, that might have meant having to put some purchases on your credit card.
And according to financial studies, we're seeing the effect going into the new year.
U.S. consumers have more credit card debt than ever before in 2018, with outstanding balances well surpassing $1 trillion, according to a Wallethub study.
"Credit card debt statistics speak to the financial health of American households. They can also foreshadow over-borrowing bubbles, changes to lending standards, and other trends with the potential to impact our wallets," said Alina Comoreanu, a senior researcher in the report.
According to the study, we started 2017 with a $30.5 billion first-quarter paydown but that amount was borrowed back again sometime during the second quarter, racking up $33 billion in new debt and another $22.2 billion in the third quarter.
The study also said outstanding credit card debt is at its highest since the end of 2008 during the great recession and Wallethub estimates the nationwide total to start 2018 at 1 trillion.
We talked to some consumers in West Palm Beach about what they think is the reason.
"They live out of their means instead of investing in good things, they invest in $3 cups of coffee and buy the expensive purse," said Ryan Gillen, who said he is credit debt-free. "Just try to live within your means as much as you can instead of trying elaborate dinners and everything. Just live down as much as possible."
Olivia Figueroa said another cause could be more and more people owning their own business or choosing entrepreneurship.
"I have my own business, I know that there's a lot of expenses that goes along with that," she said.
She said the temptations on social media for millennials to buy more material items could be another factor, along with student loan debt.
"With there being young professionals and students around here, I know there are people with a lot of student loans, so on top of credit card debts, there's student loans," she added.
There are some ways people can manage their debt. Wallethub provides a list of tips:
Make a Budget & Stick to It: It’s difficult to spend within reason or plan savings if you don’t know how your monthly spending compares to your take-home pay, or where that money is going. That is why you should rank-order your expenses – including debt payments, emergency fund contributions and other savings – and trim the fat, if necessary. Most importantly, once you develop your budget, make sure to stick to it or else you’ll have simply wasted your time.
Build an Emergency Fund: With a safety net of cash to fall back on, you won’t be as likely to fall behind on your bills in the event of emergency expenses or unplanned joblessness. Your goal should be to gradually save about a year’s worth of after-tax income. In other words, set aside a little bit every month until you’ve got a nice cushion.
Improve Your Credit: This might sound a bit counterintuitive, seeing as more credit could mean more debt. But improving your credit standing will have a dramatic impact on the cost of your debt. And reducing the cost of your debt will allow you to pay it off faster. Better credit can also make it easier to find a job or a place to live, both of which impact your bottom line.
Try the Island Approach: The Island Approach is a strategy that involves using a collection of credit cards, with each serving a specific purpose. For example, you could transfer your existing debt to a 0% balance transfer credit card to save on finance charges and get out of debt sooner. And you could use a rewards card or two – perhaps one with travel rewards and one with cash back, or maybe a store credit card – for purchases that you’ll be able to pay off by the end of the month. This will enable you to get the best possible collection of terms. It will also tell you when you’re overspending. Finance charges on your everyday spending cards will signal a need to cut back.
Repay Your Most Expensive Debt First: Most people with serious credit card debt have multiple balances. If that’s the case for you, try the “snowball method.” That means putting the majority of your monthly debt payment toward the balance with the highest interest rate and making the minimum payment required on the rest. Once your most expensive debt is paid off, repeat the process until you’re debt-free.
Evaluate Your Job Situation: In some cases, all the budgeting and planning in the world won’t be enough to solve your debt problems. You may need to explore whether higher-paying opportunities exist for people with your background or consider acquiring some new skills to make yourself more marketable.
