Dealing with Holiday Season Debt
The holiday season is often a wonderful time, but many people overspend and find themselves starting the new year dealing with significant holiday debt. Not only does this cause a lot of stress, but it can also be a very difficult situation to get out of. For example, if you accumulate a lot of credit card debt over the holidays, this debt can be very tough to pay off. It can be very costly as well, since credit cards usually charge high interest rates.
However, if you find yourself faced with a mountain of holiday debt there are things you can do. Here are some tips that can help you better deal with holiday debt and improve your financial situation.
Understand Your Debt
Once the holidays end and the bills start piling in, it can feel a little overwhelming. It’s hard to come down from the excitement of the holidays and back to reality. This means that some people ignore the bills and try to pretend that everything is fine. Unfortunately, not only does ignoring your debt not help you deal with it, but it can also make your situation worse.
It’s important that you understand your debts since this can help you prepare a strategy for paying them. Look at all your bills and figure out when they’re due, how much you owe, what interest rate you’re paying, and more. It can help to do this frequently during the holiday season, instead of waiting until it’s over. Having an accurate idea of your spending can help you make better decisions.
Come Up with a Plan
As mentioned, you’ll need to understand your debts so you can come up with a plan for paying them off. There are a few different strategies that you may want to use when you’re paying holiday debt, including:
- Paying the debts with the highest interest rate first
- Look at all your debts and figure out which one is costing you the most. This will usually be the credit card that has the highest interest rate, but the answer will depend on your situation.
- Focus your efforts on paying your most expensive debt first. That means making minimum payments on all the rest of your debts, then paying as much as you can on the one that’s costing you the most.
- Making minimum payments usually isn’t recommended, but doing so can make sense in this case.
- If you focus on paying off the most expensive debt first, you’ll save money in the long run since you’ll pay less money in interest.
- Paying the smallest debts first
- With this strategy, you make the minimum payment on all of your debts except for the one with the lowest balance.
- Using this strategy won’t save you much money, but it will help you eliminate your smallest debt as quickly as possible. Seeing a debt get completely paid off can motivate you to keep going. Motivation is a key aspect of debt repayment.
Restructure Your Budget
If you find yourself dealing with a lot of holiday debt, you’ll likely need to restructure your budget to pay it off. Look at where your money is going each month. If you’re not tracking your spending, you can get a lot of information from your bank and credit card statements. Once you know how you’re spending your money, you’ll be able to cut expenses that don’t make sense for you right now.
For instance, if you’re spending a lot of money on takeout, deciding to cook at home more often can save you some cash. If you’re currently paying for several different music and movie streaming services, consider unsubscribing from some of them for at least a while. Any money that you save from restructuring your budget can be put towards debt repayment. The more money you can dedicate to paying off debt, the faster you’ll pay it down and the less you’ll spend on interest.
If you’ve adjusted your budget and cut your spending and you still can’t find a way to pay off your holiday debts, you may wish to consider getting professional help. Dealing with debt can sometimes feel overwhelming and you may think that there are no options available to you, but that isn’t true. Working with a professional, such as a Licensed Insolvency Trustee, can help you understand your options so that you can make wise choices to deal with your holiday debt and improve your financial future.