Dig Yourself Out of Holiday Debt

/ BY / Managing Debt

Are you suffering from post-holiday debt regret?

It's easy to get caught up in the frenzy of holiday shopping, gift giving and entertainment, and it's easy to whip out your credit cards to pay for it all. But now that the season has passed, the gifts are put away and the bills are starting to flood in, you may wish that you had exercised a little more spending restraint.

You're probably suffering from debt regret if you are:

  • Maxed out on one or more credit cards
  • Having trouble sleeping because you’re worrying about paying your credit card bills
  • Hiding credit card bills from your spouse or fighting about holiday spending
  • Borrowing from your emergency savings fund to pay off your credit card bills

The cure for debt regret is simple, but it can be hard to do. You need to pay off your bills as quickly as you can, and that's going to require cutting your spending or finding ways to bring in additional cash.

Start by living within your means and giving your credit card a rest--pay cash for all your purchases. Cut back or eliminate some extras like your daily latte, take-out meals, movies or new clothes. (The savings do add up quickly.)

You might be able to get a part time job or take on some other work on the side (babysitting, dog walking, shoveling snow, etc.). You can get some cash to apply to your debt by selling items that you don't want on eBay, craigslist or at a consignment shop. If you get a tax refund, use it to pay down your debt. If you received money as a holiday gift, consider using it to pay down your debt; being stress-free is a wonderful gift!

Earmark all the money you save or earn for your debt reduction program.

Options for paying down your debt

Once you've decided to deal with your debt regret, you have a few options. Financial experts suggest taking either of these approaches:

  • Put all your extra money towards the credit card with the highest interest rate. This approach makes the most sense financially, since you'll be getting rid of the debt that is costing you the most money in interest. The drawback is that if you have a large amount to pay off, you may not feel like you're really making progress.
  • Pay off the credit card with the lowest balance first. This may be the right approach for you if you need to see the results of your debt reduction efforts sooner rather than later. You may pay more in interest over the long term, but the sense of accomplishment you get by paying down one card to a zero balance may inspire you to keep up your debt reduction efforts.

You may also want to consider transferring your balances on high interest credit cards to low interest credit cards, and then using one of the two approaches above to reduce your debt. Be sure to read the transfer agreement carefully to check for additional fees or charges that could end up putting you deeper in debt.

No matter which approach you choose, remember to keep making the minimum payments on any other credit cards that you have to maintain your credit rating.

Avoiding debt regret

Once you've gotten a handle on your debt from the last holiday, plan ahead to ensure that you won't face the same situation next year. Make a budget and start putting money aside right now for the coming holiday. Resolve to limit your spending at that time to whatever amount you've managed to save throughout the year.

Start your holiday shopping months early. If you pick up items on sale for people on your gift list throughout the year, you'll be less tempted to overspend when the holiday season comes around.

Holidays can be a happy time, but you'll enjoy them even more next year if you know that you won't be facing regrets over debt once they're over.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.