The holidays are a time for joy, family, giving … and racking up debt. A recent GOBankingRates survey found that more than a quarter of Americans have fallen into debt paying for holiday expenses — and it’s not a small amount of debt, either. Overall, the average amount owed among those with holiday debt was more than $1,000.
Of course, it’s easy to feel the pressure to spend during the holidays. But you don’t want to let overspending set you back financially in the new year. So if you ended up charging a little too much in 2018, here’s how to quickly pay off your holiday debt and start 2019 off on the right financial foot.
Figure Out How Much Debt You Have
To pay off your holiday debt quickly, you need to know what you’re dealing with, said Steven Donovan, a money coach at EvenStevenMoney.com. That means opening your credit card bills or checking your statements online. Add up all your balances to get a clear picture of how much holiday debt you have.
“It doesn’t help to stick your head in the sand; the debt will still be there,” Donovan said. “Remember, if you don’t know where you are today, you won’t know what direction to head.”
Learn More: 30 Ways to Dig Yourself Out of Debt
Develop the Right Debt Payoff Mindset
You might feel overwhelmed by how much you owe. But you can find the motivation to pay it off by focusing on the benefits of being debt-free. Melissa Thomas, founder of Melissa the Coach financial coaching, suggests asking yourself why it is important to you to pay off your debt and what you’ll do with the extra money once your debts are paid. Thomas paid off more than $40,000 in debt to free up more cash to go to Elton John concerts and possibly meet the rock legend in person someday.
Create a Debt Payoff Plan
Another way to avoid feeling overwhelmed by your debt is breaking down the total you owe into manageable amounts, Thomas said. For example, if you have $1,000 of holiday debt and want to pay it off in three months, you’d need to make monthly payments of about $333. If you get paid twice a month, that’s about $166 per paycheck — or only about $11 a day.
You could also make a chart showing how much you need to pay each week or month to eliminate your debt and track your progress. Donovan said he did this as he paid off $300,000 in debt.
Start as Soon as Possible
You don’t have to wait until you get your credit card bills to start making payments, said debt resolution attorney Leslie Tayne. “In fact, the more frequently you make payments, the less interest you’ll end up paying and the more quickly you’ll be paid off,” she said. “So you may want to consider making weekly or biweekly payments.”
Try Paying Off High-Rate Debt First
Focusing on your credit card or loan with the smallest balance first and making only minimum payments on other debts can help you feel a sense of accomplishment and build momentum to pay off bigger debts. However, you could actually pay off what you owe faster by prioritizing your debt with the highest interest rate.
“The credit cards with the highest interest rates are the ones that will end up costing you the most in the long run,” Tayne said. “Consider focusing on those first to decrease how much you owe over time.”
Find Expenses You Can Temporarily Eliminate
To pay off your holiday debt quickly, take a look at what you might be able to live without for a few months, Tayne said. You could cancel some subscription services, eliminate lunches out and make coffee at home to free up extra cash for debt repayment. “And you may find that even after your debts are paid off, you may not miss what you cut back on,” Tayne said.
Minimize Costs You Can't Eliminate
You can’t eliminate all of your monthly expenses, but there are plenty you can reduce. For example, you can cut your phone and cable bills by simply making phone calls to your providers, Donovan said.
“Once you are chatting with a customer rep, tell them that you want to cancel your service because the monthly payment is too high and mention how much cheaper the service is over at the competition,” he said. He helped a client save $50 a month — $600 a year — by doing this.
Make Extra Money for Debt Payments
After the hustle and bustle of the holidays, take time to go through your stuff to find things you no longer need that you can sell for cash. “When I first starting paying off debt, I sold my camping backpack from college on eBay,” Donovan said. “I took the $88 and applied it directly to my debt.”
You can sell DVDs, books and tech items at a website such as Decluttr. And you can sell unwanted gift cards online for cash at websites such as Cardpool and CardCash. You also could pick up a side hustle in your free time to bring in extra money for debt repayment.
Make Use of Credit Card Rewards
If you have cash-back or rewards credit cards, consider putting them to use to help pay off your holiday debt, Tayne said. “This is essentially extra,” she said. You can redeem credit card rewards for a statement credit to reduce the amount you owe.
Lower Your Interest Rate
The lower your interest rate on your credit cards, the less you’ll have to pay on top of your balances. That’s why Tayne recommends negotiating with your credit card company for a lower rate. “Call the company and let them know that you’ve been shopping around for a better rate,” she said. “Emphasize that you’ve been a good customer, always making payments on time and making more than minimum payments. The company may be willing to work with you for a lower rate, which will allow you to pay off more quickly.”
You might be able to eliminate interest on your credit card debt altogether if you take advantage of a zero percent balance-transfer offer and pay off what you owe during the period when the low-to-no interest rate applies. Watch out for balance transfer fees, though.
Stick to Cash
If you want to pay off holiday debt quickly, you have to avoid racking up more debt. “If you are struggling with spending, I recommend switching to cash to become more disciplined,” Donovan said. Allot yourself a certain amount each week. Once it’s gone, it’s gone.
Not only can using cash help reduce your reliance on credit, but also it might help reduce your overall spending. Donovan said for both him and for clients, it’s easier to feel the pain of parting with cash more when it leaves your wallet.
Keep Reading: Tips to Living a Cash-Only Life
Create an After-Action Plan
After paying off your holiday debt, you need to take steps to avoid racking up debt again next holiday season. “The best way to get out of debt is to not accrue it in the first place,” Thomas said. She recommends creating a savings plan to have enough cash for the holidays in 2019.
Just as you created a plan to pay off debt by breaking down what you owed into smaller payments, you can figure out what you need to save based on 2018 holiday spending. Then, divide that amount by the number of months left in the year until the holidays to know how much you need to set aside each month.
Click through to learn more about how to save money fast.
More on Paying Off Debt
- How Tiny Living Helped a Couple Pay Off More Than $200,000 in Debt
- 30 Passive Income Streams That Will Help You Pay Off Debt
- Why You Should Invest, Even When You’re Paying Down Debt
- Watch: Treating Finances Like a Game Will Help Get You Rich
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