Overcoming Holiday Debt: Tips to Get Back on Track and Regain Financial Stability
The holidays are here! And with the gifts, decorations, and travel that go along with the holidays, it’s easy to see how spending can stack up at this time of the year. In fact, Americans spend an estimated $1,000 on Christmas each year!
Sometimes, this spending can even cause you to go into debt. The good news is that there are things you can do to overcome your holiday debt and get back on track financially.
First, don’t beat yourself up about the choices that led to the debt. This can lead to feelings of shame, making it harder to tackle the problem head-on. Instead, give yourself a bit of grace while taking steps to deal with the debt.
Here are some tips that you can use to get back on track and regain financial stability while overcoming holiday debt.
Make Your List
When you’ve gone into debt over the holidays, it can be hard to face it. But, if you’re ready to overcome it, this is where to start. After all, you can’t solve the problem if you don’t know what it is. So grab a piece of paper, create an Excel spreadsheet, or use the list app on your phone to make a complete list of your debts.
Be sure to include who you owe, the balance, the interest rate, the minimum monthly payment, and the due date. Having all this information in one spot will help you stay organized. Once you have all your debts listed, add them up to determine the total amount you owe.
Choose Your Best Strategy for Dealing with Debt
Once you’ve gathered the details about each of your debts, the next step to get back on track and regain financial stability is to pick the best debt repayment strategy for your situation. There are three common strategies to choose from.
The Debt Snowball
With this method, you organize your debts from lowest to highest balance (excluding real estate). Then, make the minimum payment on each debt. After that, apply any extra funds to your lowest balance debt until it’s gone. Continue working through your debts from lowest to highest until they are all paid off.
The Debt Avalanche
With the debt avalanche, you’ll arrange your debts from highest interest rate to lowest interest rate (excluding real estate). Then, make the minimum payment on each debt. Apply any extra funds to your highest interest-rate debt until it’s gone. From there, you’ll move on to putting any extra funds towards the next highest interest rate until all of the debts are paid.
Most Emotional Debt
Sometimes, debt comes with a high level of emotion attached to it. This debt can be hard to look at, let alone deal with. And this emotion can hold you back from dealing with your other debts as well.
If you have a specific debt that’s emotionally charged, prioritize paying it off first while making the minimum payments on your other debts. This can help you build momentum.
Remember, as you’re working to get back on track to overcome holiday debt, pick a debt repayment method that makes the most sense for you and works with your situation.
Having a strategy to pay off your debt will help you focus your efforts so you can get back on track and regain financial stability.
Check In with Your Budget
One of the best things you can do to get back on track and to keep going forward in the right direction is to check in with your budget and spending.
Take time to sit down and review your spending over the holidays. Where did your budget creep up? How is the rest of your spending? Do you have subscriptions you don’t use anymore or any other expenses you can cut?
Getting your spending more in line with your income can help you find money to put towards debt.
It’s also important to remember that you may have to adjust your budget during the winter months to account for seasonal changes like increased heating costs.
Reviewing your spending is a good thing to do on a weekly or monthly basis. But it’s especially important to do when you are trying to get back on track.
Find Extra Income
If you want to speed up your progress towards eliminating holiday debt and getting back on track, finding extra income can help. Whether delivering food or groceries, walking dogs, picking up extra shifts at work, or turning a hobby into a side business for profit, there are countless opportunities to earn extra income.
Even if it’s just temporary, having more cash flow can help you get out of debt quicker. It can also give you a chance to save some money in an emergency fund, which can help improve your financial stability.
If you’re unsure where to start, sign up for SaverLife and check out the SaverPerks with cash-earning opportunities. SaverPerks are vetted companies and organizations offering quality opportunities to earn extra income and reduce expenses.
If you want to get back on track after the holidays and overcome your debt, setting goals will help.
When you create your goals, write them down and keep them where you can see them. Be as specific as possible and make sure your goals are realistic in terms of your budget and what you can afford to pay. Also, make sure to set a timeframe for making the payments and completing the goal.
For example, “My goal is to pay off this $1,500 credit card debt in three months by putting $500 towards the balance each month when I get paid.”
This will help you create goals you can stick to and eliminate your holiday debt faster.
Track Your Progress
As with any goal, tracking your debt repayment progress can help you stay motivated. When progress feels slow, tracking helps you see that you’re still moving toward your goal of overcoming holiday debt.
It’s helpful to track your total debt, each individual balance, and your payments over time. Each time you make a payment, record it. Doing this will help you see all the good your hard work is doing.
Find a tracking method that works for you and that you’ll stick with. It could be pen and paper, an Excel spreadsheet, or an app. What matters is that you find a simple method that you’ll use consistently.
Plan Ahead for Next Year
All of these tips can help you get back on track after the holiday season. And that’s important. But it’s also important to learn from this season and have a better plan for next year.
Once you’ve organized and paid off your debts, it’s time to look ahead.
Consider how much you spent this holiday season. If you’re comfortable with spending that money again next year, great! If not, adjust the number up or down to one that is more reasonable. Divide your total holiday spending by the number of pay periods you have before you’ll need the money. This will let you know how much to set aside from each paycheck.
Then, in a separate savings account, start saving now for the holidays. Once you’ve paid off your debt from this year, those debt payments can go straight into savings. This will help you get ready for a wonderful holiday season next year without repeating the cycle of holiday debt!