Today’s post is contributed by Amy Nickson, a passionate writer on finance. Amy is a professional blogger whom has started her own blog and also works as a contributor for the Oak View Law Group. Please share your opinions by commenting below.
11 Ways you can get out of holiday-debt blues
Most of the people in our nation start the New Year with post-holiday debt blues. The reason is pretty simple; people use their credit cards for buying holiday supplies (gift, decoration, and clothes), throwing a party, planning trips, and many other things that are associated with the holiday celebration.
Even some people who are money wise face post-holiday financial stress due to overspending during the holiday season.
If you are no different and spent more than you could afford, you must be in credit card debt.
So, what can you do now to get out of the post-holiday debt?
There are various practical and smart things that you can do to deal with the post-holiday debt blues. Here you go:
1. Accept your holiday debt
You need to accept your debt and start thinking about the ways to get out of it. Be diligent about what you are doing; it will take a few days or maybe months (depending on the extent of your debt amount) to get out of it.
2. Analyze your debt
Analyze your debts to know which debt to pay off first. For example, the higher interest rate debt is costlier than lower interest rate debt. Thus, you should try to get rid of the highest interest rate debt first. You will have to be aware of the extent of your debt as well. Thus, you can decide the right debt payoff method to become debt free.
3. Choose the right debt payoff strategy:
Choosing the right debt payoff strategy is vital. You will find many debt payoff strategies like professional debt relief methods and DIY debt payoff methods.
Professional debt relief methods
DIY debt payoff methods
Debt consolidation loan
Balance transfer method
To get professional debt relief service, you need to contact a third party debt relief organization; they may charge you certain fees. On the other hand, you can pay off your debt on your own by learning the DIY debt payoff strategy.
4. Avoid further borrowing
You need to avoid accumulating further debts after the holidays. Focus on your current debts to get out of it as soon as possible.
5. Maintain the on-time debt payments
You should maintain the on-time debt payments against the debts that you have incurred during the holidays. This will help you in not only paying off the debts fast but also in improving your credit health.
6. Get rid of the highest interest rate debt first
Debts are costly and the high-interest rate debts are costlier. Thus, you should focus on paying off the highest interest rate debts first. To do so, you should follow the debt avalanche method.
The fundamentals are, you need to arrange your debts by interest rate. The highest interest rate debt should be on the top, which means you should target the higher interest rate debt first.
Now, try to make larger payments on the highest interest rate debt while making the minimum payments to the rest of the debts.
Continue this process until you pay off the highest interest rate debt. Following this method will help you to get rid of all your debt sooner.
7. Try to pay more than the minimum on your “target” debt.
Paying more than the minimum is the key to get rid of the debt fast. This is the only way you can pay off your debts without getting help from any third party debt relief company.
As I said earlier, to get out of debt on your own, you need to target a debt first. It can be the highest interest rate debt or lowest amount of debt. The thumb rule is, you have to pay more than the minimum on your “target debt” while paying the minimum to the rest of the debts.
My favorite debt repayment plan is debt avalanche (the process is described in point no. 6) because the highest interest rate debt is draining your wallet at the fastest rate. But if you can’t afford the payments of the highest interest rate debt, then prioritize on your smallest debt first no matter what is the interest rate. Now, you need to pay more than the minimum to the smallest debt while paying the minimum to the rest of the debts (debt snowball method).
No matter what debt repayments method you’re following, you have to pay more than the minimum to pay off your debts on your own.
8. Consider balance transfer method
You can consider the balance transfer method to get out of debt easily. If you have multiple high-interest credit card debts, then you can transfer your balance to a low-interest credit card to pay off easily. You can avail the introductory or teaser offers on a card to take advantage of the 0% interest rate on it. But make sure you pay down your debts before the introductory rates end. If you are unable to pay off your balance during the introductory period, then the interest rate bounces back to what you have been paying before you opted for a 0% balance transfer.
9. Take out a consolidation loan to pay off your entire holiday debt
Taking out a consolidation loan can be a good option to get out of the holiday debt. However, people who have better credit score can get better rate and terms of the new loan. Because, if you take out a consolidation loan with high-interest rate and the loan term is too long, then eventually you’ll pay more.
10. Avoid using credit cards unnecessarily
When you are working on paying off your holiday debts, avoid using credit cards to avoid incurring further debts. Remember, you have to make the credit card bill payments within the stipulated time. If you don’t do that, you will fall into credit card debt cycle easily. So, you shouldn’t buy an item using a credit card that you can’t afford with cash. Follow this to stay debt free forever.
11. Live within your means to set aside money
Setting aside money is important to pay off your debts. If you don’t restrain your expenses, you will not be able to make bigger payments on your “target debt”. So, cut down all unnecessary expenses and live within your means. To do so, you have to revisit your budget to make changes. Try to save as much as you can after meeting your monthly obligations like (household cost, utility bill, insurance premiums, and other loan payments).
Lastly, post-holiday credit card statement can be a reason for stress. But instead of being panic-stricken, you should strategically plan and work hard to eliminate your post-holiday debt blues.
“Author’s Bio: Amy Nickson is a web enthusiast. She shares her expertise through her crisp and well-researched articles based on money management, money saving ideas and so on. You can follow her blog, Working Moms Word, where she shares her expertise on personal finance.”
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