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The fun part’s over — now it’s time to deal with the bills.
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The holidays are behind us, but the effect they have on your wallet can stretch far into the new year. Unfortunately for a lot of people, that means holiday debt. If you’re carrying any, you probably know it can affect your ability to pay your bills and save for your long-term goals, including this year’s holiday gifts.
Getting out of holiday debt isn’t always easy, but here are three tips you can try to get your finances back under control.
1. Take stock of your situation
You need to know what kind of debt you have if you want to pay it off as efficiently as possible. If you charged holiday expenses to credit cards, make note of the balance on each card, the annual percentage rate (APR), the minimum payment, and the payment due date.
If you used a Buy Now, Pay Later (BNPL) service, make note of how much you still owe, the minimum payment, the payment due date(s), and any interest or extra charges you could incur.
2. Make a debt repayment plan
Once you know what you’re dealing with, you can craft a plan of attack. The simplest way to tackle debt repayment is to set aside extra cash every week or month until it’s paid off. If you’re going this route, you’ll need to make a budget for 2023 so you know how much you can put toward debt repayment each month. This might not be your best move, though, particularly if you have a credit card with a high interest rate.
You may make better progress with a balance transfer card or a personal loan. Balance transfer cards offer 0% introductory APRs for a number of months. During this time, your credit card balance won’t grow, so any payments you make go toward reducing your principal. However, it’s worth noting that there are one-time fees associated with balance transfers. And if you fail to pay off the full balance by the end of the 0% APR period, the remainder will begin accruing interest again.
Personal loans enable you to avoid the race against time by setting you up with a predictable monthly payment. These loans don’t require collateral, but because of this, interest rates are typically higher than what you see with other types of loans, like auto loans. But if you keep up with your payments, you won’t have to worry about additional charges.
3. Put extra cash received toward your debt
Throughout the year, take any windfalls you receive and put them toward your debt repayment first. If you received any cash as a gift for the holidays, you could start with that. You could also use birthday money and pay raises, if you get them.
In addition, tax season is just gearing up, and you could receive a tax refund this year. Sometimes, these can be worth thousands of dollars and might be enough to wipe out your holiday debt entirely. But getting your refund takes time. That’s why it’s best to file your taxes as soon as possible. Doing this will also help reduce the risk of a thief filing a fraudulent tax return on your behalf.
It might take some time to get out of holiday debt, but don’t give up. Track your progress to keep yourself motivated and begin planning for this year’s holidays so you don’t fall into the same trap. If you have any extra cash left after paying off your debt, put it in a savings account so it’ll be waiting for you at the end of the year.
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