The amount of money spent by Americans during the holidays is pretty staggering. In 2016, holiday retail sales were projected to hit $1 trillion from a figure of about $630 billion in 2015. With more money being spent, it’s no surprise that so many people find themselves dealing with post-holiday debt. Over 70% of Americans end up overspending on holiday purchases every year, even with vast knowledge on holiday spending tips.
Luckily, there are various ways to help you recover from your holiday spending hangover and even pay off the holiday in installments. They say the magic is always in the budget, but a budget is just a small part of creating a smart holiday spending and debt recovery plan. Holiday debt is a serious issue that many people are trying to free themselves from, despite efforts to cut spending.
In this article, we’ll cover some concrete steps to help you get out of holiday debt quicker so you can take full control of your finances and move on in the right direction.
Review Your Current Financial Situation
Before you can come up with a dept-solving plan, you need to have a realistic picture of your finances. Start by being honest with yourself and compile any documents related to your holiday expenses and be familiar with holiday spending tips. Separate everything into categories so that you can estimate how much you’ve been spending in each category. Don’t just focus on holiday expenses but also include regular expenses.
Your goal here is to understand what you currently have and how much you’ve been using both during the holidays and afterward. By knowing where you stand financially, you’ll be able to identify ways to cut back on expenses that will help you pay off your holiday debt.
Develop a Plan to Pay Off Your Debt
The smartest way to pay off holiday debt is by developing a strict plan for saving, reducing expenses in the post-holiday months, and paying off credit card purchases. Start by writing down all your debt amounts, names, and interest rates so that you can plan how to pay them down. Below are some proven strategies for your payoff plan:
Create a Holiday Debt Deadline
Decide to get rid of your holiday debt within a specific period—such as 90 days. Divide up the total debt amount in three to determine how much you’ll have to pay extra every month over the next three months. If you’re dealing with large debt, you need a longer-term plan and deadline that takes into account your credit card payoff dates while keeping in mind your holiday spending tips. You can also opt to pay off the holiday expenses in installments.
Focus on the Highest Interest Rate Debts First
While it’s important to plan how you’ll be making minimum payments on all of your holiday debts, your focus should squarely be on the debt with the highest interest rate, regardless of the amount. This is especially true if your holiday debts are spread across multiple loans and credit cards. In many ways, this is considered the fundamental principle of an effective debt repayment plan.
Organize your list of debts based on interest rates with the highest interest rate debt at the top of your list. That should be your focus because it’s the one draining most of your money at the fastest rate.
Consider Paying More than the Minimum
If you want to get rid of your holiday debt faster, you have to make more than the minimum payment on the debt you’ve decided to focus. This is one of the most important post holiday spending tips. For instance, if you’ve been making a monthly payment of $60 on your credit card, how about you amp it up to $160 every month? By doing that, you’ll be able to reduce the payment time and even save you money in the process.
By addressing your holiday debts head on with as many additional payments as you can, you’ll get to save yourself a lot of money in the process. No matter what plan you come up with, you must be as aggressive as possible and stick with it.
Dig Through Your Closet and Storage Spaces
There is a big likelihood that you have unused stuff, duplicate holiday gifts or other items that you’re probably not going to use just lying around in your house. You can sell these off to fund your holiday or pay off your debt. It might not have been part of your favorite holiday spending tips or preferred way to pay off holiday debt, but you’ll be surprised to find out how much you can do by selling off these items to pay off the holiday in installments.
Optimize Your Debt
Optimizing your holiday debt involves strategies to pay less interest on what you owe. If you have planned on paying off your debt within a year, consider moving it to a 0% balance transfer credit card to help you save money. The trick is to pay off the entire balance before the low or no interest period of your transfer card expires.
Create a Practical Spending Plan
To make your holiday debt payoff plan work, you’ll need to create a realistic spending plan for the year and cut back on unnecessary expenses that you can save. Use a budget planner, a free budget app, or a spreadsheet to track your income and expenses accurately. Set clear spending goals and monitor how much you spend on clothes, luxuries, dining out, and other miscellaneous expenses that could help you pay off your debt. Follow these post holiday spending tips and trim your post-holiday expenses as much as possible.
Cut Back on Using Your Credit Cards
Credit cards offer a quick and convenient way to shop around, but they can quickly become a liability. Many people lose track of how they use their credit cards for holiday shopping. Even with a spending plan, the best way you can get rid of your holiday debt is by stopping new charges on your credit card until you’re in the safe zone. You can’t be working so hard to pay off debt when you’re still piling more on top.
Stop buying what you shouldn’t, stop buying too many gifts for your kids, and stick to holiday spending tips you have learned. You have to make some sacrifices to get your holiday debt under control. Remember the key here is not to deny yourself what you want but to be more mindful of how, where, and what you’re spending your money on.
Plan Ahead to Avoid Holiday Debt Next Year
The next holiday will come, and nothing is so frustrating like finding yourself in the same situation paying off debt after the holidays. Considering that the holidays always come with extra expenses, start planning early. Create a separate “holiday savings” account to take care of most of your holiday expenses at the end of the year, and even consider a financial plan to pay off the holiday in installments.
Managing your holiday expenses plays a huge role in maintaining a debt-free life. Here’s your plan: be smart on your holiday spending, have a post-holiday spending plan, cut back on expenses, reduce credit card charges, have a “holiday savings” plan to avoid falling into debt again after the holidays, and always review your holiday spending tips.
To learn more about getting out of holiday debt, talk to finance experts at Cashback Loans. We help you know how to plan your finances and offer solutions that can help you pay off your holiday debt in installments.