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How to spend holiday income

By Marcie Geffner · Bankrate.com
Tuesday, December 13, 2011
Posted: 9 am ET

A temporary holiday-season job can be a big boost to many people's personal finances.

Indeed, some estimates suggest approximately 500,000 workers might pick up some extra income before the end of this year, thanks to holiday-related employment.

But for all its benefits, temporary income stretches only so far.

That's why the nonprofit National Foundation for Credit Counseling, or NFCC, has put out a list of priorities to help temporary workers figure out how to allocate their holiday income.

While gifts might be a strong temptation, "it's more important to think long-term," NFCC spokeswoman Gail Cunningham said in a statement.

Top of the list should be to pay the rent or mortgage and utility bills, stock up on groceries and take care of other "must-have" living expenses. Keeping a roof over your head, food on your table, gas in your car and the lights on in your home can go a long way toward restoring stability to your life, the NFCC said.

Second priority should be to catch up on past-due car payments. If your vehicle is repossessed, you'll lose the down payment you made when you purchased it, and you'll owe fees associated with the repossession. If you can't catch up on the loan, call your lender and ask about an extension and payment plan.

Third priority should be to pay other overdue debts such as credit card payments, which left unpaid can damage your credit score, trigger late fees and potentially result in a judgment or wage garnishment against you.

"Without a steady income in sight, bringing past-due obligations current will allow you to start the new year on more solid financial ground," Cunningham said.

The next priority should be home or auto repairs, perhaps some that have been neglected due to financial straits. Repairs and maintenance now can help avoid much worse and more costly problems later.

After you've protected yourself from eviction, foreclosure, repossession and credit-score damage, sock away at least 10 percent of your holiday-season income in a savings account. Saving is a significant step toward financial stability and the best protection against financial disaster.

Follow me on Twitter: @marciegeff.

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