The holiday season often brings joy, celebrations, and some financial stress as many people accumulate debt from shopping, travel, and festivities. However, it’s possible to regain control and start paying off holiday debt by planning effectively. In this article, we’ll discuss five actionable steps to help you tackle your holiday debt and emerge financially strong in the new year.
1. Assess the Total Debt You’ve Incurred
During the 2024 holiday season, many Americans have accumulated significant debt due to increased spending. According to a survey by LendingTree, 36% of Americans took on holiday debt this year, with those incurring debt averaging $1,181. Before making any plans, it’s crucial to understand the full scope of your holiday debt. Gather all your credit card statements, store credit information, and any loans you may have taken for the season. Tally up the total amount you owe, including interest rates and minimum payments. This will give you a clear picture of what you need to tackle and allow you to prioritize your debt strategically. Once you have an accurate number, you can create a realistic budget and payment plan.
2. Create a Realistic Budget for Paying Off Holiday Debt
As of February 2024, the average monthly debt payment for American consumers is approximately $1,225. Having a budget is essential when it comes to paying off holiday debt. Start by evaluating your monthly income and expenses to see how much you can allocate toward paying down your debt. Make sure to include essential living costs, such as rent, utilities, and groceries, but don’t forget to leave room for debt payments. You might need to cut back on discretionary spending temporarily to free up funds. With a concrete budget in place, you’ll be able to make consistent progress toward eliminating your debt.
3. Prioritize High-Interest Debts First
When paying off holiday debt, prioritize high-interest debts, especially those on credit cards. Credit card interest rates can quickly add up, making it harder to pay off your balance over time. Focus on paying off the debt with the highest interest rate first (the avalanche method), or consider using the snowball method by paying off smaller debts first for a motivational boost. Whichever method you choose, make sure you consistently make payments above the minimum to reduce your overall debt faster. This strategic approach will help you save on interest payments and get out of debt faster.
4. Consider Consolidating or Refinancing Your Debt
If your holiday debt feels overwhelming, consider consolidating or refinancing your debt for easier management. A 2023 survey by Forbes Advisor found that 54% of respondents used a personal loan for debt consolidation to simplify and reduce their monthly payments. Debt consolidation involves combining multiple debts into a single loan with a lower interest rate. Refinancing could also lower your interest rates, allowing you to pay off debt faster and save money. These options can simplify your financial situation and reduce stress, but they may require good credit or additional fees. Explore these options to find the best solution for your unique financial situation.
5. Find Extra Sources of Income to Boost Your Debt Repayment
Increasing your income, even temporarily, can be a game-changer in paying off holiday debt. Consider picking up a side gig, freelancing, or offering services such as dog walking, babysitting, or tutoring. Even selling unused items from your home could bring in extra cash to put toward your debt. You might also consider using any work bonuses, tax refunds, or other windfalls to make larger payments. The more effort you put into increasing your income, the quicker you’ll eliminate the financial burden of holiday spending.
Take Charge of Your Debt and Start Fresh in the New Year
Paying off holiday debt doesn’t have to be overwhelming. By assessing your debt, budgeting wisely, prioritizing payments, considering consolidation, and increasing your income, you’ll be on your way to financial freedom. The key is staying committed and realistic about your repayment plan. Remember, the sooner you take control of your debt, the sooner you’ll be able to start the new year with a clean slate and a healthier financial future.
Vanessa Bermudez is a content writer with over eight years of experience crafting compelling content across a diverse range of niches. Throughout her career, she has tackled an array of subjects, from technology and finance to entertainment and lifestyle. In her spare time, she enjoys spending time with her husband and two kids. She’s also a proud fur mom to four gentle giant dogs.