How to get out of holiday debt with few easy habits

How to get out of holiday debt with few easy habits

Are you thinking about how much money you have already wasted by overspending in the last holidays? You might also be thinking about how to get out of holiday debts that you have incurred during the last holiday season.

In a survey of 1,147 U.S. individuals, more than ¼th (26%) Americans admitted that they have plans to accumulate debts during the 2016 holiday season. Among that 26%, 2/3rd people expected to pay off holiday debts in three months or more.

The average credit card user and other borrowers incurred $1,003 in debt in the holiday shopping season in 2016. 15% of total Americans (including 19% millennial) agree that they’re still struggling with the holiday debts from the 2017 holiday season.

Last year, they racked up an average of $1,054 of debt over the holidays, 5% more than last year, as per MagnifyMoney’s annual debt survey.

So, if your overspending habit in the last holiday is keeping you down in a big credit card bill, do not panic just yet. All you need to recover from your post-Black Friday shopping madness debt hangover is a plan.

How to manage debts after the holidays

Curing holiday debt blues may not happen overnight, but developing the right habits can help you avoid an overspending repeat.

1. Find out the root cause of overspending

First things first, you have to find out the root of your holiday debts. Did you shop without making a proper budget for the holiday shopping beforehand? Did you surrender yourself totally before impulse buying? Did you end up paying more as you have waited too long for prices to drop?

Getting to the root of your overspending nature can help you to get a vision and you can make different choices the next time the holiday shopping season comes.

2. Keep your credit cards away for a while

You will realize your actual financial situation when you get your hands on the credit card statement. So, what will be your next move? I’ll tell you what to do: Get back to ground zero and use cash or debit cards to make payments. This way you might be able to restrict yourself from adding new debts to your existing holiday debts.

While you’re putting your credit card away for a while, check out once the annual percentage rate you’re paying. If it is high enough to give you nightmares, consider the balance transfer method and consolidate your credit card debts through a different credit card with a 0% APR.

So, basically, you need to stop the source of incurring more debts over your pre-existing holiday debts. It might become difficult to manage your expenses with a limited money source. But that’s the only way to stop yourself from generating more credit card debt.

3. Reboot your budget plan

Once the holiday season is over, you should wrap up your bags and get back to your normal life with the regular spending rules. During the holidays you might have to spend a lot (most likely), but this is the time when you must control your spending urges and figure out how to manage debts after the holidays.

You should begin by chopping off your fixed expenses, trying to trim them down as low as possible. Next, target your variable expenses like utility bills, transportation costs, cell phone bills, entertainment costs, expensive dinners with friends, etc.

These are some of the variable expenses that you may control if you really want to. However, it is not possible for you to change your monthly rent payment or other fixed expenses.

Next, analyze and fix the amount you can invest for debt repayment each month.

For example, suppose you have $6,000 in credit card debt and you’ve used the balance transfer method with a 0% APR and a 3% transfer fee. So, your current outstanding balance is $6,180. To pay off this balance before the promotional period expires, you’d need to pay $412 per month.

Now that you have the magic number, start budgeting from scratch, and lower your variable spending. Make sure to save at least $450 a month. This way you can save a surplus of $38 every month.

It will look like this in 11 months:
($38+$38+$38+$38+$38+$38+$38+$38+$38+$38+$38) = $418, it means you’ll have 1 month’s worth of installment in your hand in advance.

So, for the last few months, you don’t have to worry at all and your debts will be paid off within the 14th month, one month before the promotional APR expires.

4. Initiate automatic payment option

The best way to pay off holiday debts is to set up an automatic payment system from your checking account to your credit card. Once you initiate an automatic payment system, it’ll give you two benefits:

  • A) It’ll help you to stay current on your monthly payments. Making late payments can hurt your credit score. Putting payments in auto-pay mode ensures that you’re reducing your debts each and every month without fail.
  • B) It’ll save your dollars which you might have to pay as late fees and interest charges. You might also avoid paying such charges if you choose a balance transfer method to consolidate your debts…..

5. Start planning for the next holiday season

As you’ve worked out a plan to stay on your budget and decide how much you will pay towards holiday debt, remember to leave enough room in the plan to save. Set up an online savings account just for holiday purchases, commit to adding a specific dollar amount to it each month, and look for money-saving ideas throughout the year.

That way, when the holiday shopping season begins again, you’ll have sufficient money in your hand. If you’ve worked out a budget in advance, you’re less likely to wind up with another holiday debt hangover.