Sense & Centsibility Blog

Got Holiday Debt? Seven Steps to Take for a Financially Healthy 2017

Yep, the holidays are over and now it's time to get back to reality. Many people will be paying for gifts they charged for months and possibly years to come.  If you have holiday debt, chances are you’ll end up paying much more than the original purchase price. The scrooge-o-meter is a great way to see how much your purchases will truly cost.

If you would like to take charge right away and pay your holiday debt off faster, here are steps to take:

Cutting up credit card1. Stop using your credit cards

First things first: don't make any more purchases on your credit cards if you can't pay off right away what you charge. If you are tempted to use them for more than you can afford, cut up your cards to take away that temptation. The more you charge, the longer it will take to pay off your debt.

2. Create a realistic spending plan

If you find yourself using credit cards for daily purchases like groceries or gas because you ran out of cash, setting up a budget is a must. Be as accurate as possible. If you find that you're spending more money than you take in each month, cut spending where possible.

3. Make higher than the minimum payments (when you can)

Creditors are required to show you how long it would take to pay off your debt with a minimum payment and a slightly higher payment – including the total amount you’d end up paying. This information is on your monthly statement. Whenever you can, make higher than the minimum payment; otherwise you could be paying off your credit card for 10, 15, or more years.

4. Check into a Debt Management Plan

A debt management plan (DMP) is a simple, fast way to pay off your debt. You would make one monthly payment to LSS, and we would then pay your creditors monthly. The beauty of a debt management plan is that with on-time payments your credit score will improve and your credit cards will be paid off IN 5 YEARS OR LESS. Also, typically there’s a lot of money saved because of the reduced payoff period and potentially lower interest rates.

5. Start or add to an emergency fund

The only way to be prepared for unexpected expenses or income reductions is to build up savings. Find a balance between paying your bills, making credit card payments, and saving at the same time. Because if you paid off all your debt and then your car broke down, how would you pay for it? Use your budget to determine how much you can set aside and then set up an automatic deposit into savings monthly or every pay period. If you can't start by saving a lot, that's okay. Start small and increase as you are able. If you get a tax refund or are expecting another type of monetary windfall, use part of it to pay off debt and part of it for savings.

6. Build your support network

Let your friends and family know that you’re trying to cut costs, stick to a budget, and build up savings. That way you won’t feel pressured to give gifts or to go out for coffee or dinner or other things that create an extra cost. Perhaps you can have a game night in and cook dinner together to share and reduce costs. It's a whole lot easier to achieve your goals when you have people on your side.

7. Break the vicious holiday debt cycle

Financial healthWhen the holidays come up next year, it can be easy to fall back into old habits. This may be the hardest part, but it’s the most crucial to avoid getting into more debt. Use your support network and be creative with gifts instead of using your credit cards. And keep in mind that your friends and family don't want you to go into debt because of Christmas or other holidays/events. Read "10 Tips to Avoid Financial Chaos this Holiday Season" for more helpful tips.

Paying off debt is like working out and eating healthy:

  • You have to put in the time and work
  • Results aren’t immediate
  • But you’re going to feel SO much better when the weight of debt has been lifted

Call LSS Financial Counseling at 888.577.2227 to get back on the road to financial stability. Our Financial Counselors will empower you to conquer your debt and achieve your financial goals. Click to GET STARTED with your free online financial counseling session.

Author Elaina Johannessen is a Program Director with LSS Financial Counseling.