27 Jan The Best Ways to Tackle Post-Holiday Debt
Key Takeaways on How to Tackle Post Holiday Debt
- Plan and budget well in advance of the holidays.
- Save a little each month to avoid adding holiday debt to your high interest credit cards.
- Set a short time horizon to pay off any added credit card debt from the holidays.
- Find a short-term “Side Gig” to earn extra cash to pay off holiday debt.
- Stay focused and be diligent about paying off balances from the holidays first.
The abundance of bargains, a festival spirit, and obligatory gift exchanges can ruin the best holiday budget. The best strategy to avoid falling further behind financially in the new year is to set a strict holiday spending budget well in advance, and stick to your plan. However, if you find yourself with a mountain of holiday debt come January, you are not alone. In 2018, Magnify Money reported that consumers added an average of $1,230 to existing debt balances due to holiday overspending. Adding to that, the National Retail Federation estimates that during the 2019 holiday season, consumers will spend an average of $1,047.83, meaning most holiday spending ends up on a credit card.
The High Cost of Credit Card Debt
The challenge with buying on credit is the high rate of interest accrual, which can double or triple the cost of the purchase, making those “can’t pass up” sale items, expensive. For example, if you accumulated an average amount of holiday debt, credit card balances would increase by $1,230. With credit card interest averaging 19.21%, it would take 98 months (or just over eight years) to pay off the debt making minimum payments. Meanwhile, the total interest paid would balloon to $1,220, nearly doubling the cost.
The solution is to pay off holiday debt quickly, lessening the damage to your finances. Here are the best ways to tackle post-holiday debt:
- Tally Up the Damage: You can’t set concrete goals unless you understand the size of the problem. Separate holiday debt by reviewing credit card statement charges in November and December. Starting here makes debt elimination more manageable.
- Practice Budget Awareness: Without understanding current spending habits, debt reduction does not happen. Having a clear understanding of where your income goes will help uncover ways to cut back on spending and free up funds to pay off holiday debt.
- Give Yourself a Deadline: Just wanting to pay down debt does not create the motivation necessary to accomplish the task. Set a goal with a strict timeline and then break down how much you need to set aside every day or every week to reach your goal. Having a specific target will help you reduce expenses enough to pay off holiday debt quickly.
- Find Extra Cash for the Cause: Locating extra cash can come from a reduction in spending or taking on a side gig. You can also “find” money by selling unwanted gift cards on a website like Cardpool or returning unwanted gifts. Using windfalls such as a holiday bonus or your tax refund can also reduce debt balances at a faster pace.
- Make it a Priority: Reducing debt, saving for retirement, building an emergency fund, and saving for college all fight for attention. Setting financial priorities provides a clear path to where you will allocate income, leading to faster progress and greater success.
Holiday debt does not need to cripple your debt reduction progress. Get back on track by reviewing how much debt you added and then finding creative ways to get the funds necessary to pay off the holiday debt. Implementing a short timeline for debt payoff will save you money on interest accrual and build a habit of healthy financial habits beneath your budget, allowing you to eliminate other debts faster.
About Titan Consulting Group
Titan Consulting Group helps consumers evaluate various debt relief options and choose the right program that best fits their short-term and long-term financial goals. We work with consumers seeking debt consolidation loans, or who may be considering options like debt negotiation or bankruptcy. Through our network of partners, we can help you find the right solution to reach your goals and get back to living a life free from high interest credit card debt.
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