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Holiday Debt Re-Payment

How to Effectively Pay Down Holiday Debt

The holiday season is a wonderful time filled with family, friends, and festivities that you’ll treasure for many years. Hopefully what follows isn’t a debt that will also be with you for many years.

That said, holiday debt is common. Many people have a lot of financial commitments over the holiday season and the result can be a large debt in the new year. If you’ve found yourself with some holiday debt, here are some tips that can help you pay it down.

Understand What You Owe

The holidays are a very busy time. Within all the hustle and bustle, it’s easy to lose track of what you’re doing and how much you’re spending. However, now that things have quieted down a bit, it’s important to look at your debt and see exactly what you owe and who you owe it to.

Look at all your credit card bills, bank statements, and any other financial records you have. Figure out the amount you owe to each creditor, the interest rates on each debt, how often you are expected to make payments, and any other relevant information.

You can’t come up with a plan to pay off your holiday debt unless you have all the information.

Adjust Your Budget

Once you know how much you’ll need to pay back, you’ll need to adjust your budget so that it fits. Look at your current spending and see where you can make cuts. This will help you afford your new debt repayment costs.

While you may not be able to reduce your fixed expenses very much (this means things like mortgage or rent payments, utilities, transportation costs, etc.) there are likely cuts that you can make in variable spending. For example, while you’ll obviously you’ll need to continue to spend money on food, you can probably reduce your costs a bit. Consider cutting down on the amount you eat out and prepare your meals at home instead. This can save you a lot of money. Reducing your grocery bill itself is another good way to free up some extra cash. Some ways to do this include shopping sales, using coupons, buying in-season fruits and vegetables, and shopping with a list so you don’t overspend.

Another area where many people can make cuts is by reducing the amount spent on cable, phone bills, and various subscription services. These days most of us are signed up for at least one or more music or video subscription services. In many cases, these costs can be cut down. Think of what you actually watch in an average month and whether it’s worth keeping all of your subscriptions. The same is true for your cable and phone bill. If you don’t watch all the channels you pay for or you don’t use up all the data you get on your phone plan each month, consider downgrading your plan to something more affordable.

Come Up with a Plan

Effectively paying down debt doesn’t just mean finding money in your budget to make the monthly payments. It also means coming up with a plan for paying down your debt that works for you.

One common way to do this is what’s known as the “debt avalanche” method. This involves focusing your efforts on paying off the most expensive debt first. This is typically the one with the highest interest rate. The idea behind this method is that if you pay off the most expensive debt first, you’ll save yourself money overall. To accomplish this method, pay close to the minimum payment all on of your debts other than the most expensive one. Then use whatever money you have left for debt repayment to chip away at your most costly debt.

Of course, that isn’t the only strategy that people use. Some people prefer the simplicity of paying off all of their debts equally. This works fine as well. Just distribute how much you have available for debt repayment equally across all debts. A benefit to this strategy is that it’s one of the easiest to follow.

A third option is what’s called the “debt snowball” method. With this strategy, you focus your efforts on paying the smallest debt first, while paying the minimum on your other debts. A benefit to doing things this way is that you’ll see your individual debts disappear as you go, which can really help keep you motivated.

No matter what method you choose, pick the one that makes the most sense to you and that you’re the most likely to stick with. While paying off holiday debt can seem difficult at first, if you have a plan and you keep going, you’ll eventually get there.