Christmas Crisis: 6 Steps To Take If You’ve Plunged Into Debt This Holiday Season
All the presents have been opened and everyone has gone home. Now, all you’re left with is a messy house and a mountain of holiday debt you underestimated.
This is a common scenario, with many people finding themselves in more debt after the holiday season than they had anticipated. It’s easy to lose track of your Christmas spending, so if you’ve sunk more on gifts, travel, and parties than you realized, try the six steps below to regain control of your finances.
Step 1. Make a Budget
If you’re looking for help to get out of debt after the holidays, the first thing you need to do is make a budget. The idea is to free up extra money to pay off the additional debt you’ve accumulated. Begin by figuring out how much income you have coming in and how much money you have going out in an average month. Once you’ve identified these parameters, you can begin eliminating unnecessary spending to free up money for your holiday bills.
Step 2. Transfer Balances to Another Card
In some cases, it might make sense to transfer your current balances to a credit card with a zero-interest rate for balance transfers. This will allow you to pay off your debt interest-free if you do so before the introductory period expires. Just be aware that this method might carry a balance transfer fee of up to 5 percent of the total amount you’re transferring.
Step 3. Commit to a Payment Plan
If you have balances on multiple credit cards, implement the Snowball Method to pay them off quickly. List your credit cards in order from the smallest balance to the largest. Pay as much extra as you can afford toward the one with the smallest balance while continuing to pay the minimum due on the rest. Once the first one is paid off, shift the extra amount you were paying on it to the next one. As you continue paying your debts off this way, the amount you pay toward each will increase, enabling you to knock them out quickly.
Step 4. Stop Using Those Credit Cards
If you continue using those credit cards while you’re trying to pay off your holiday debt, you’re really getting nowhere. To truly be debt-free and make the whole budget thing worth it, stop using your credit cards and pay cash for everything instead. When you physically see the money leaving your hand, you’re more likely to think about how you’re spending it.
Step 5. Talk to Your Creditors
If you have a good payment history with your creditors, you can ask them for a lower interest rate. While this won’t amount to huge savings, even the smallest reduction equates to money you don’t have to part with each month.
Step 6. Get a Temporary Side Job
Once you’ve put all the other steps into play, it might still be necessary to get a temporary side hustle to help pay off your holiday debt. If you’re only able to make the minimum payments each month, or it takes you almost until the next holiday season to pay off your debt, a part-time side hustle will give you the extra funds you need to get out of debt fast.
Because the holiday season is so fun and magical, it can be easy to overspend. If you find yourself in too much debt after the holidays, implement the six steps above to dig your way out.