Ways To Pay Off Holiday Debt
The holidays mark a season that is full of joy, comfort, and familial bliss. After all, you get to enjoy a few days of relaxation, some great food, and the company of your loved ones. Oh yeah, and all that Holiday Debt…
That’s right, at the same time, the holiday season can be a trying time in terms of expenses. The quality ambiance, good food, and the trips and presents for your loved ones don’t come cheap. With that being said, you want to do everything you can to ensure that your holidays don’t turn out to be bleak.
Unfortunately, the pressure to make the most out of your holidays can sometimes lead you to make unwise financial decisions. You may find yourself breaking into your savings, spending more than you earn, and using your credit cards without giving it a second thought.
A survey conducted by financial reference website NerdWallet covered this type of behavior over the holiday season and it found that around 89% of Americans planned to buy gifts for friends and loved ones over the holiday season. And how did they plan on paying for their holiday spirit? 73% admitted that they would be utilizing their credit card(s).
If you were right there in that same crowd, that means that the end of the holiday season marked the start of paying off that additional holiday consumer debt.
With that in mind, we wanted to provide a few tips to help you pay that debt off in a timely manner.
1. Make a Budget
The key to paying off your holiday debt is making a budget and, the main element, sticking to it. Make sure that you have not only looked at the interest rates associated with your cards but have also calculated the cost that’d be required to make the payments going for them each month. Deducting your costs from your monthly expenses such as rent or bills will give you a good idea of the kind of lifestyle you can enjoy while you pay off your debt.
Following a budget will also help you manage your payments on time, which will help you steer clear of any late payment penalties. Additionally, sticking to a budget will keep you from overspending in other segments and of course assist you in paying off that debt as soon as possible.
2. Pay Off Your Highest Debt First
If you used multiple credit cards for your holiday shopping, then you need to ensure that you pay off the highest debt first.
While clearing the balance of your lowest spending card can provide you with a little short-term relief, in the long run paying off the larger debt saves you more money. This can enable you to utilize any additional funds to pay off your other debts more quickly.
3. Can Your Debt Can Be Consolidated to a Card With a Lower Interest Rate?
Take the time to compare interest rates for the multiple credit cards you already have. Debt consolidation works very effectively when you’re working towards a goal of paying off your debt faster, but the key is to do it with a credit card that provides a lower interest rate than those other cards.
Upon determining which card provides the lowest interest rate, your next step is to confirm whether it offers debt consolidation. If it does, then simply have your debt from other cards transferred over.
This simple step allows you to manage your interest rates and pay off your debt more quickly.
4. Make Regular Payments Whenever You Can
Don’t wait until the next due date to make a credit card payment, make them as soon, and as often, as you can. This simple practice can help you reduce and stay focused on eliminating those holiday debts.
Additionally, if you have a credit card that charges you on the average daily balance, then this can actually save you some money in terms of interest as well.
5. Try Working Extra
Of course, earning some extra cash wouldn’t hurt in these situations where you could use it the most. Check with your place of employment to determine if extra hours are available and if you happen to operate your own business, then you may want to see if you can roll out a mix of optimal price points to increase your profits.
However, if these options aren’t available, then you have the option of taking up micro jobs or temp positions wherever you can. You may want to check out platforms such as Amazon Mechanical Turk to find microtasks to complete. Additionally, you can sign up with ride-sharing platforms such as Uber or Lyft or join Airbnb and put additional rooms in your place for rent. All of these income generation ideas can help you pay off your debt more quickly.
6. Sell Off Any Items You Don’t Need
The holidays can help you obtain newer models of electronics, such as a new phone, camera, or video game console.
If you’re a lucky recipient of such a present, then you can easily sell off the previous one to help bring in some additional cash, which you can then use to pay off that holiday debt.
7. Limit Your Luxury Spending
You splurged over the holidays and now it’s time to buckle down.
This means no spending sprees until you’ve paid off your debt. Shopping for new clothes to update your wardrobe or buying headphones to get a better sound quality for your music can wait. Opt to dine at home instead of eating out and maybe take your lunch to work a couple more times a week and you’ll likely be quite surprised by how much this simple act can save you.
The goal is to limit unnecessary spending and utilize the savings to put towards those credit card balances.
It’s Not Impossible to Pay Off Your Debt
A huge part of the puzzle is minimizing as much of the interest rate as you can and allocate savings toward paying off the principal as soon as possible.
While paying off your debt may sound like a gargantuan task, making sure that you have a proper plan in place goes a long way. Take a breath, create a payoff plan that suits your financial situation the best, and then stick to it.
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