How to Get Out of Holiday Debt for Good

4155243997_6537756aa5Image courtesy of Shandi-Lee

So many people have a tendency to hugely overspend on friends and family during the holiday season – charging hundreds to thousands of dollars on credit cards. The holiday hangover comes in January when the bill start rolling in.

In fact, countless people are still paying off holiday debt from years past [PLURAL]. However, it does not have to be that way! There are steps that you can take to reduce your overall credit debt and specifically, your impulsive holiday spending spree. Facing pressure from children, friends and family members, more and more people are spending higher dollar amounts during the holidays in order to get the gift that everyone wants. You are not alone, and there is hope!

The first step to eliminating the extra credit card balances that you racked up in November and December, is to admit that you have a problem. Put the credit cards down. Take them out of your wallet and put them in a place where you can’t easily access them. Start using your debit card for all shopping so that you are forced to use only the money that you actually have in your bank account. To continue using your credit cards after December will only compound the problem.

Sit down and open up all of your credit card bills. This may be a difficult and emotional step, but ignoring the bills will not make them disappear. List all of your credit cards, their balances, their percentage rates, and the minimum monthly payments. Determine how much money you can allocate toward credit card payments each month.

One effective debt reducing method is tackling the credit card with the highest balance first. In doing so, you will eliminate your biggest money suck, and you will have more money to throw at your remaining cards. During this phase, pay only the minimum on any other credit cards. This is known as debt stacking, and will save you a lot of money in the long run.

Another option is to pay off the card with the smallest balance first, working your way up to the card with the highest balance. Debt snowballing gives consumers a quick taste of success with the first card paid off quickly, which may be the motivation you need to keep going.

It’s also a good idea to call up your credit card company in an attempt to negotiate a lower percentage rate (APR). Use language like, “In an effort to reduce my bills, is there any way to lower my interest rate in order to help me pay this debt off?” Avoid telling them that you can’t pay your bill. You can also look for offers from credit card companies offering 0% interest for balance transfers. By transferring your highest balance onto this card, you’ll save on interest payments and will be able to pay your debt off that much faster.

Find one or two expenses that you can eliminate in order to push that money towards eliminating your holiday debt. Call your gym and ask about freezing your monthly membership. Alternatively, find a cheaper gym. Talk to your cable or satellite provider about lowering your monthly payment by stepping down to a lower package temporarily. You can reward yourself by reinstating your original package once your debt is paid down. Resolve to not purchase any new clothing or unnecessary items until you have managed to eradicate your holiday debt. Check out local thrift shops like Goodwill and Salvation Army if a need arises like an outfit for a job interview or a warmer winter coat. Remember to check eBay and Craigslist for other absolute necessities that may arise during your debt elimination period.

If all of these changes aren’t making a big enough dent in your holiday debt, you may have to find another way to make additional money, at least temporarily. Have a yard sale, or scour your house for any valuable items that may be in demand and try your hand at eBay. You may have jewelry, art or expensive clothing that is just sitting around the house. It’s better to sell some things than risk going into further debt and not being able to find your way out.

Finally, remember that there will be another holiday season at the end of 2014. The sooner you start planning for it, the better. As soon as your previous year’s holiday debt is wiped out, set up a holiday budget and start taking notice of what your friends and family are interested in now. Buying slowly throughout the year, while looking for sales and using coupons and promo codes, will allow you to shop for the holidays with cash, hopefully avoiding a holiday hangover in 2015.

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One Response to How to Get Out of Holiday Debt for Good

  1. Pingback: How-to Tuesday: Affordable Holiday Shopping | Veitengruber Law

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