What to Do About Holiday Debt
All the gifts have been given, you’ve seen your loved ones, ate some really good homemade cooking, and now that the holiday season is over, you’re only left with a lot of debt.
According to a recent survey conducted by MagnifyMoney, the average American is left with about $1,054 of debt after the holidays and will end up having to pay about $500 in interest.
If you are one of the thousands who is struggling to get rid of their holiday debt, here are some tips on how to do so and how to avoid debt next holiday season.
Don’t Make Minimum Payments
If you can afford to put more money towards paying off your debts than just your minimum, you should do so. By only paying the minimum payments, you are only acquiring more debt because of interest, and if the interest rates are high enough, it could even set you back and cause you to not make any real headway with paying off your debts.
Focus on the Highest Interest Rates First
This goes hand in hand with not only making minimum payments. When paying off holiday debt, it is important to look at all your debt on all of your credit cards and figure out which ones have the highest interest rates. It is important to pay off those debts first in order to minimize the amount of money you end up having to pay in interest.
Create/Tighten Your Budget
If you don’t already have a budget in place you should consider creating one to help you pay off your holiday debts. By creating a budget, you can calculate your monthly expenses and from there tighten your budget to remove unnecessary purchases such as Starbucks or subscription services. Making a budget and sticking to it will enable you to pay off your debt more quickly and efficiently.
Cash in on Rewards
If you have frequent flyer miles, cash back rewards, etc. use that towards paying off your holiday debt. This is extra money you can put towards debts that you will not miss because you never had it in the first place. However, you should NOT rely on your tax returns to help you pay your holiday debts.
Plan for Next Year
In order to avoid future holiday debt, it is important to start saving early. Even if you only set aside a small amount of money each month, it’ll build up over time and give you enough to jumpstart your holiday shopping and help you avoid taking on too much debt. You should also budget for the holidays; whether you set a total amount you spend or a per person amount, it will be useful in keeping track of your spending and prevent you from over-extending yourself financially. Planning ahead will help prevent you from starting the new year with overwhelming debt.
If you have an overwhelming amount of debt and find you are not getting anywhere by paying off what you can each month or are struggling to make monthly payments, then it may be time to turn to a debt resolution attorney. A debt resolution attorney can help mitigate with your creditors to potentially lower your monthly payments, interest rates, or even help you forgive your debts.