Are you finding yourself with a debt hangover now that the holidays are over? You are in good company as millions of Americans find themselves in the same boat, dealing with holiday debt. No matter how well you planned to keep it reasonable, if you ended up taking out your credit cards and spending as much as 30% of your credit line, as many others did too, it’s time to figure out how to pay those debts down.
Below are a few tips you can use to get out of your holiday debt.
Assess Your Debt
First, before you do anything, assess your debt. Where do you stand? How much did you actually spend? What are the interest costs that you incurred? Know the ins and outs of each credit card so that you can make informed decisions.
Assess Your Budget
Next, assess your budget. Be honest with yourself, where do you stand? Can you pay the debt off in full? This is ideal, but not practical for everyone. If you can’t, don’t worry, you’ll just move onto the steps below. If you can pay it off in full without causing harm to other areas of your financial life, do it and don’t hesitate. If not, keep reading.
Create a Plan
Now here’s the nitty gritty. You need to make a plan when dealing with holiday debt. You know the amount of your debt and your budget. How much money can you put toward your debt each month? The more you can pay down now, the better. Choose from one of the following methods:
- Debt snowball – Arrange your debts by balance. Choose the card with the smallest balance and pay as much toward it as you can while making minimum payments on your other cards. Once you pay off the lowest card, move onto the next card, using the same method.
- Debt avalanche – Arrange your credit card debt by interest rate with the highest rate first. Pay any extra money you have toward that card, making the minimum payment on all other cards. Once you pay off your first card, move to the next card in line using the same strategy.
Finding Extra Money
What if you don’t have ‘extra’ money to pay toward your debts? Try any of the following tips:
- Cut down on certain habits, like coffee stops
- Cut the cord on cable
- Start a side gig
- Apply any windfalls, such as tax refunds or work bonuses
- Clip coupons
- Cut subscriptions or memberships you don’t use (apps like TrueBill can make this easy!
- Have date nights ‘in’ rather than out
- Eat out less
Before you know it, you’ll have enough money to pay off your holiday debt. Don’t forget, though, the holidays come at the same time every year – start saving now, even if it’s just a little bit. This will decrease the need to use credit cards next year, avoiding the need to find the answers to dealing with holiday debt.