How To Survive a Holiday Season Financial Crisis

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Considered the “season of giving,” the holidays are a magical time when we get to enjoy the look of surprise and delight on our loved ones’ faces when they open the thoughtful gifts we purchased and wrapped specifically for them.

The only problem is that many people overspend during the holidays — the average U.S. consumer expected to spend approximately $794 on Christmas gifts in 2018, according to Statista.

The season of giving then turns into the “season of debt” for some, turning it into a holiday financial crisis that bank accounts can need the entire new year to bounce back from. To keep the “Ghost of Christmas Past and Present Debt” from haunting you, I asked some personal finance experts for their advice on recovering from the financial issues that holiday spending can cause.

Last updated: Nov. 30, 2020
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Learn From Your Mistakes

Feeling guilty about what you did won’t solve the holiday financial crisis now or even stop you from repeating the same behavior next Christmas. What can help is reflecting on why you did it and how you can enact changes so you don’t end up repeating those financial mistakes.

“Don’t beat yourself up about it because you’ve already done it,” said Jon Bradshaw, CTO of Appointment. “Learn from your mistakes. You may realize in reflecting on the situation that you didn’t need to buy that much, so focus on how you will be more disciplined next Christmas.”

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Create and Implement a Payback Plan

Beyond understanding where you went wrong, it’s important to take action on paying off the holiday debt as quickly as possible.

“I’d say don’t go crazy during the holidays, but, now having a child, I get why people overspend at Christmas,” said John Rampton, founder and CEO of Calendar. “If you do overspend, create a payback plan for yourself starting in January, where you create a budget focused on prioritizing holiday credit card debt before buying anything extra like movies, coffee or meals out. You’ll have to wait for all those extras until the holidays are paid off.”

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Spend Less Than You Earn

Sometimes it’s the simplest advice that’s the most effective.

“Get back to the basics: Track your expenses, create a budget, and look for ways to decrease your spending and increase your income,” said Steven Donovan,  a financial coach and owner of Even Steven Money“It’s boring advice, but spending less than you earn repeatedly will help you recover from the financial damage. I paid off over $100,000 in personal debt by doing just that.”

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Check Your Credit Report

If you noticed that your credit score has slipped post-holidays, it might be because of increased debt or missed payments — or it may be a sign of fraud.

“All three credit bureaus — Equifax, Experian and TransUnion — offer free annual credit reports. Checking after the holidays is a smart idea, particularly because fraud and identity theft are high during the holidays,” said Leslie H. Tayne, author, financial attorney and the founder and director of Tayne Law Group, P.C. “By checking your report, you’ll be able to look for any inaccuracies or instances of suspicious activity. Finding and disputing these can help make sure you’re only paying for what you should actually owe.”

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Calculate Exactly How Much Debt You Have

“Look at any money you owe on credit cards and make a spreadsheet of all of your holiday debt,” said Jeff Rose, CFP and CEO of Good Financial Cents. “Prioritize paying it all off in a timely fashion. Every available cent apart from your fixed expenses should go towards paying off this debt as fast as possible. You don’t want the interest building up, so give up things like fast food and trips to the movies until the balance is paid off.”

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Review Your Budget

“Never underestimate the power of a budget,” said Rachel of MoneyHackingMama.com. “You may have more money than you realize every month — it’s just going away on things you don’t notice. Review all your monthly expenses and see if there are places you can cut so you can put extra money toward your debt.”

Don’t Have One? How To Create a Budget You Can Live With

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Enact a Debt Repayment Method

There are many methods for debt repayment promoted by various money experts. Review each model to see which one might work well for your overly festive holiday credit card balances.

“I suggest using the snowball method for attacking that holiday debt,” said Brad Anderson, editor-in-chief at ReadWrite. “That involves going after those smaller balances first and knocking them out. Once those are paid off, then you can take what you applied to each of those bills and combine them to make larger payments on the bigger balances.”

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Alternatively, Focus On Paying High-Interest Debt First

“After the holidays, consumers should focus on paying off the debt with the highest interest first, and as aggressively as they can,” said Mike Kinane, head of U.S. Bankcard at TD Bank. “Credit cards and store cards typically have higher interest rates, so assess your bills and prioritize the higher debt first.”

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Set Up Automatic Payments

“I recommend automating payments on your cards so you don’t get slapped with any late fees,” said Andrea Woroch, consumer and money-saving expert. “Look at your monthly budget to figure out how much you can realistically put toward your debt each month.”

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Keep Track of Your Progress

“Tracking your debt repayment efforts will help you stay motivated and not give up,” said Woroch. “There are several apps, like Mint, you can use or even just track [your progress] in a traditional spreadsheet.”

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Make More Than the Minimum Payment

“If you racked up a good deal of debt over the holiday season, paying it down as quickly as possible will help improve your financial health as well as rid you of the psychological burden,” said Tayne. “When credit card companies generate your minimum monthly payment, it is generally barely over what you were charged in interest that month. As a result, making only the minimum payment won’t get you very far when it comes to paying down a substantial amount of debt.”

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Negotiate Lower Interest Rates on Any Credit Cards With Unpaid Balances

“We often simply accept the interest rate we’re given from the credit card company. However, you may be able to negotiate with the credit card company for a lower rate,” said Tayne. “Call your creditor and let them know that you’ve been shopping around for better rates. The company may be willing to work with you for a lower rate, which will allow you to pay off [debt] more quickly.”

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Take Advantage Of Promotional Offers

If you’re unable to negotiate a lower interest rate — or even if you can — you might consider opening a new card to take advantage of promotional interest rates for new cardholders.

“Credit card issuers are competing for customers, so there will be a lot of attractive card offers in January for new and existing customers,” said Kinane. “Many promotional offers feature a 0% interest rate for an extended period of time, with only a small fee to transfer a balance. Consumers who take advantage of a 0% card offer will want to make sure they can pay off the balance within that promotional period.”

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Consolidate High-Interest Debt

“Another option is a debt consolidation loan,” said Kinane. “This is a viable option for those who racked up significant holiday debt over several different cards or lines of credit. A debt consolidation loan allows consumers to consolidate higher-interest debt into one monthly payment. These loans typically offer a lower interest rate than credit cards, and the rates and terms are usually fixed, which means borrowers will also have a concrete end date for when their debt is paid in full. There is typically a fee associated with a debt consolidation loan, so it makes sense to shop around.”

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Return Gifts To Repay Your Debts

In addition to giving during the holidays, you might have also received many gifts — and maybe not all of those gifts are things you like. Rather than throw those items in the closet, you can return them and use the proceeds to help recover from your holiday financial crisis.

“While it may not sound very festive, it might be realistic to return some of the items you received to help pay off the debt you incurred from overspending,” said Chalmers Brown, CTO of Due. “You can also look for other things to sell as well to help your holiday repayment plan.”

Need To Save More? How To Save Money on All Your Monthly Expenses and Bills


Use a Debt Management App

Consider letting technology do the heavy lifting for you.

“If you find yourself in the red after the holidays, Tally’s automated debt management app can help you pay down your credit card debt if you qualify,” said Bethy Hardeman, personal finance expert at Tally. “It’s simple – once you scan the credit cards you’d like us to manage, we analyze your credit profile to determine if Tally can offer you a line of credit with a lower APR than you’re currently paying to help you save money. The app also advises you on how to pay off your credit card debt faster, manages your credit cards and offers late fee protection.”

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Try a No-Spend Month

The less you spend, the quicker you’ll be able to pay off any debt. Rachel recommends trying to reduce your spending to as close to zero as possible for an entire month.

Treat it as a game and don’t buy anything that you don’t absolutely need,” she said. “Try to make meals based on what you have at home. Need toothpaste? Before you go buy it, check around your house for those samples from the dentist. Obviously you’ll still need to pay your rent and utilities, but try to get creative when wants come up, and don’t buy something you need unless you’ve tried to get creative to get it for free or at a discount first.”

If you don’t think you can do this challenge for a full month, don’t sweat it.

No-spend challenges can be a day, a week or a month — it’s up to you to set the rules, including which types of purchases are acceptable and which aren’t,” said Tana Williams, a personal finance blogger at DebtFreeForties.com. “This type of challenge is about resetting those automatic spending habits that have formed. By creating a barrier between you and automated spending, you’re more likely to think about your wants versus your needs, which means you’ll be saving more money — and that means paying off that holiday overspending much quicker.”

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Cut Back on Grocery Spending

Cara Palmer of Smart Money Tips said to cut down on all expenses — including those that you might think of as necessary, like groceries.

If you have food leftover from the holidays, you can eat that,” she said. “Look for canned items or frozen foods in your kitchen that you could prepare a meal with. The money you save on food alone can be enough to pay down a few hundred dollars on your Christmas debt.”

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Pause Monthly Payments That Aren’t Necessary

“When it comes to those regular bills, figure out which ones you need and where you can cut back,” said Woroch. “You should cancel your gym membership if you haven’t been using it or at least put it on hold for a few months until you have a better handle on your credit card balances. Spend time reviewing each of your cards for regular monthly charges and figure out which of those recurring bills can be canceled.”

You might also consider putting a pause on any streaming services you don’t need.

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Use Cash To Make Purchases

“People can recover from financial setbacks by using cash to make purchases,” said Chris Manske, CFP, owner and operator of Manske Wealth Management and author of the upcoming book “The Prepared Investor.”

Not only will this prevent you from incurring more credit card debt, but studies have also shown that people tend to spend less when they make purchases in cash.

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Pick Up a Side Hustle

Increasing your income is one of the best ways to get out of a financial crisis.

“Become a rideshare driver, deliver food for Uber Eats or Postmates, or participate in paid sleep studies,” said Rose. “Side hustles are great ways to accumulate cash for things like paying off debt quickly.”

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Cash In Your Rewards

“If you were overspending on credit cards during the holiday season, the one benefit may be that you may have racked up some rewards,” said Tayne. “Consider leveraging these rewards — particularly cash-back rewards — to help pay down your debt more quickly.”

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Use Financial Tools to Your Advantage

Beyond directly addressing your holiday overspending, you’ll need to get creative when it comes to finding extra funds to alleviate the holiday financial crisis. Utilizing the numerous financial tools available is one place to start.

“Focus on getting more effective financial tools in place as you move into 2020,” said Brian Whorley, CEO of Paytient. “Make sure you are fully utilizing all of your employee benefits. For example, many employers now offer new benefits like Paytient. This is an employee benefit that allows you to pay for out-of-pocket medical expenses through payroll deduction at no fees and 0% interest. Benefits like these can help you absorb the inevitable financial bumps in the road, especially during the holidays.”

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Set Financial Goals for the New Year

It might be hard to look for the light at the end of the tunnel when you’re drowning in holiday debt, but now is the best time to prepare yourself for a financially sound 2020.

“Consider setting goals to keep yourself financially on track all year long,” said Tayne. “Perhaps you want to cut back on your spending, beef up your emergency fund or start contributing more to your retirement fund. Considering your bigger financial picture can help you get financially healthy and stay financially healthy for the year to come.”

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Plan Ahead for Next Holiday Season

Take steps to ensure your holiday financial crisis doesn’t become an annual occurrence.

“Plan for the future,” said Rachel. “While you may have gotten yourself into trouble, you don’t have to repeat the process. Once you pay this debt off, start to save every month for next Christmas so you don’t find yourself in this situation again.”

R.J. Weiss, CFP and founder of the personal finance site The Ways to Wealth, recommends automating the process of saving for next year.

“This can be as easy as setting up an automatic monthly withdrawal from a checking to a savings account, which is earmarked for next year’s holiday budget,” he said. “For the tech-savvy, you can use apps that allow you to round up spare change or make small automatic deposits on your behalf based on rules you set.”

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Stay Positive

Don’t let your post-holiday financial stress get you too down.

“Paying off debt can certainly be stressful, but having a positive attitude about your debt can be incredibly beneficial,” said Tayne. “Not all debt is ‘bad’ debt. Debt is only bad when it becomes uncontrollable. Thinking about your debt in a positive light will motivate you to pay it off faster and dread it less. There is nothing wrong with putting purchases on credit cards and paying them off. Have your plan, make sure it works for you and your personal finances, and stick to it.”

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Gabrielle Olya contributed to the reporting for this article.