What's not to like about vacations? Perhaps the debt that follows it! Whether going overseas or holidaying in India, there are always interesting sights to travel to, novel restaurants to try out, exotic gifts and souvenirs to buy - but unfortunately, none of these memorable experiences come for free. Your wallet might not hold such happy memories with higher than usual expenses and a surge in your credit card bills. However, the good news is that it is possible to plan for these increased financial obligations and pay off your debts in an organized manner after you return. Here are some ways you can recover from vacation-induced debt, so that the aftermath is as happy as the holiday.
The first thing to do on your return is to organize your credit card bills and make a list of the various balances due, prioritizing them in terms of interest charges. Focus on paying off the card that has the highest interest rate, while at the same time ensuring that you pay at least the minimum due on your other cards. If you pay off the balance on the card with the highest interest rate, you will be saving money in the long run in terms of overall interest paid.
Once you have dealt with the first card on your list, move onto to paying off the next card which has the second highest interest rate. You need to systematically continue this pattern of repayment until you have paid off all your outstandings.
You could also try the reverse and start by paying off the card with the lowest balance and interest rate. A study conducted by professors from Northwestern University's Kellogg School of Management showed that by fully paying off one card in a relatively short period, the individual was psychologically motivated about being successful in clearing the larger amounts ahead. Feel free to use either method, so long as you are following a disciplined plan of repayment.
One other option is to convert large expense items incurred on your credit card into an instalment repayment plan. Make sure that you choose the credit card with the lowest interest rate to do this. This provides you with the discipline of repaying the extra expenditure incurred in a planned manner. Research the various cards that offer this facility before you go on holiday and their interest rates, and then make sure that large items of expenditure are incurred on this card, so that they can be converted to an instalment repayment plan on your return.
Naturally, in order to find the money to pay off your extra holiday bills, you will need to temporarily reduce your regular expenses. Set a realistic weekly or monthly target and make the planned payments on time. If you are married, then it might be a good idea for both spouses to have an individual target so that you do not have disagreements on which expenses to cut down on.
If you have got a work-related bonus or received a lump sum of money for any reason, avoid the temptation of spending it on yourself, and use it to clear your holiday debts. Another way to cut down spending is to take a temporary break from your card and use cash when you go shopping. This way you have full control over your expenses and can limit your purchases literally to the money in hand.
One proactive step you can take is to reduce your expenditure before going on your holiday. If you have planned your vacation well in advance, then it would be advisable to limit your expenses in the month or two preceding your holiday. That way you will have some extra cash as buffer on your return with which will be very welcome when you start organizing your repayments.
Going on holiday is always fun - not so much the expenses associated with it. Following the tips above will help remove some of the stress of clearing your holiday-related debts.
Guest Author
The author is CEO and co-founder of CreditMantri
