Experts Share Top Tips to Pay Off Holiday Debt

Highlights

  • Holiday spending in 2018 was strong and consumers added to their credit card debt.
  • Carrying debt for holiday purchases inflates the cost when the interest you pay is added.
  • Review tips from top financial experts about how you can pay off holiday debt.
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Top Tips to Pay Off Holiday Debt

You ever spend more than you should? It is very easy to do. Advertising is everywhere; the message to consume non-stop. Add to that the ease of using a credit card. Insert chip in card-reader, sign, and away you go with your purchase. It doesn't even feel like spending money, or, at least can give you the illusion that you aren't. Shopping online is even easier, Amazon's one-click option is designed to get you to buy before you can think about it carefully. It is almost like a voice is whispering, seductively, in your ear, "Buy me. You know you want me." All these factors conspire against your financial health.

It's even worse when the Holiday Season comes around. Gift giving is an important part of the holidays for most people. Advertising is on steroids. Stores offer you discounts if you open a credit card account and charge your purchases. If there is any time of the year during which it is easiest to run up too much debt, it's during the holidays. So, after the holidays pass, what's the best way to take care of holiday debt that lasts well past the celebration?

Bills.com asked 6 financial experts for their top tips on how to get rid of holiday debt. Read their advice and share any ideas that worked for you.

Six Top Tips to Pay Off Holiday Debt
  1. Cut Expenses and Use Savings to Pay Off Debt

     

    Andrew Schrage is the CEO of Money Crashers, a top personal finance site dedicated to helping people turn the tables on money and make it their ally. He is passionate about filling the void in our financial education system and creating a community of people who can embark on their financial journeys together. Money Crashers covers everything from credit cards to home improvement tips to raising a family on a budget.

     

    Your best bet as far as getting out of holiday debt is to first, figure out how much debt you're in, so you have a number with which to work from. Then, analyze any and all spending and look for ways to cut costs across all expenses, including monthly bills and discretionary spending, particularly on entertainment expenditures. Then, use these increased savings to start paying off your debts, starting with your high-interest credit cards and other debts that are costing you monthly fees and interest. If that plan doesn't get you completely out of debt within a short period of time, consider the prudent use of a balance transfer credit card to essentially postpone the payment of the debt (interest free) as long as the card is used responsibly and your ultimate goal is always kept in mind to pay it off as quickly as possible.

  2. Face the Debt Head-On
    Tracie Fobes is the owner of PennyPinchinMom.com. She helps teach families how to budget, save money, and get out of debt. She has been featured on Good Morning America, the Wall Street Journal and other publications. When not busy sharing money saving strategies, you can find her at home with her family in Raymore, Missouri.

     

    The best way to get out of holiday debt is to face it head on. All too often it is easy to ignore and just make the minimum payments. Make a list of everyone you owe money - starting with the least amount at the top. Get an extra job. Stop dining out. Do whatever you can and get that first bill paid off. Once you do that, the process is easier and faster to help you pay off the rest of your holiday debt more quickly.

  3. Use the 3 Envelopes Method

     

    Steve Chou Father, Blogger, Online Store Owner, Podcaster, MyWifeQuitHerJob.com

     

    To get out of holiday debt, I recommend implementing the 3 envelopes method.

    Envelope #1 is for paying off debt every month and is the first envelope that gets contributed to when a paycheck comes in.

    Envelope #2 goes straight to savings and this money goes straight to a savings or investment account

    Envelope #3 goes into spending cash and is used to pay for living expenses

    By allocating your funds into these 3 categories right away, you can gradually whittle down your debt and stash away money at the same time. It may also help to consolidate all of your debt into a single payment using a debt consolidation service.

  4. Start Saving Early
    Melanie Lockert Melanie Lockert is the founder of award-winning debt blog, Dear Debt 

     

    In order to get out of holiday debt, first, assess the damage. How much do you really owe? Stop using credit cards and go on a cash cleanse. Cut back on expenses and focus on your highest interest debt first. To prevent holiday debt in the future, start saving year round, even just $20 per month.

  5. Make A Plan to Attack it Now
    John: Frugal Rules

     

    John is the founder of Frugal Rules, a site devoted to helping readers achieve financial freedom through wise money management.

     

    The best way to get out of holiday debt is to make a plan to attack it now. The average family spent almost $1,000 on holiday shopping this year. If put on a credit card, with no plan of paying it off that can grow substantially. Find one bill to lower and one way to bring in additional income - whether it be asking for a raise, selling items from around the house, or a side hustle, use the combination of the two to kill the debt. Don't just stop there, make a plan for this upcoming Christmas. Start saving money now so you can spend with confidence come November and December and not add debt.

  6. Prioritize the Debt Based on the Interest Rates
    Brittney Mayer

     

    Brittney Mayer is a Credit Strategist and Finance Expert with CardRates.com who has spent years honing her knowledge of the credit industry both personally and professionally. Brittney applies her more than a decade of research experience to crafting in-depth consumer guides designed to help CardRates readers make better, more informed financial decisions.

     

    Dealing with any kind of debt, including debt leftover from the holidays, starts with making a plan. A good rule of thumb is to prioritize the debt based on the interest rates, with the most expensive debt (i.e., the debt with the highest APR) at the top of the list.

    Put any extra money in your budget -- without skimping on the minimum payments for other debts -- toward the most expensive debt until it's paid off, then roll over your payments to the next debt on the list. If high interest fees are slowing the process (and you have good credit), consider a balance transfer to a card with an introductory 0% APR offer; even with less-than-perfect credit, you may be able to find a lower-fee card at a local credit union. Make sure you include any balance transfer fees when deciding whether to transfer your balances.

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4 Comments

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  • SC
    Mar, 2019
    Sally

    Do you have any suggestions for a good app to help me save money? I know budgeting apps are important, but I find it hard to keep on top of them. I heard about apps that help you save small amounts of money. Then I could use that to pay off debt. Do those really work?

    0 Votes

    • 35x35
      Mar, 2019
      Daniel

      Don't give up on budget apps. I am not sure what you used, but take a couple of minutes and read about these five budget apps.  I understand that it can feel like a lot to keep up on, but it is a great way to monitor your spending, and the app automates a lot of the effort, categorizing your expenditures and giving you different ways to analyze your spending. They can even prompt you in ways that keep you on track. Choose one and give it a try. 

      When it comes to savings, there are definitely apps that help you "micro-save." Check these out and give one a whirl.

      0 Votes

  • GC
    Mar, 2019
    George

    Thanks for the tips. I am really deep in debt. I am seriously struggling and falling behind. I cut way back on holiday presents, meals, and cancelled our vacation. I have some late bills and am afraid that I am going to get collection calls. What should I do?

    0 Votes

    • 35x35
      Mar, 2019
      Daniel

      Sorry to read about the strain you are under. Here are few ideas for you:

      1. Being late is not good, but do your best to avoid being 30-days late on any payment that is reported to the credit bureaus. That will keep you from harming your credit score.
      2. Contact your creditors if you are going to be late to see if you can avoid any penalties or fees and to see if any hardship program is available.
      3. Look at your options for getting out of debt by using our free Debt Payoff Calculator.
      0 Votes

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