Whether it’s stocking up on gifts for friends and family or running up a bit of credit on a holiday house rental, Christmas can often be a time where we spend a little more than we should. They don’t call it the silly season without good reason. If you find that you’ve overspent this past Christmas, here’s 9 tips on how to beat the Christmas blues and pay off those holiday debts quickly and easily.
1. Make a list
Christmas might be over, but now it’s your turn to be making a list (and checking it twice). Open up a spreadsheet or grab a notepad and pen and make a list of everything that you owe. This should include the amount, the credit card or loan it’s associated with, and when final payment is due.
Don’t worry if you feel a little naughty going over what you owe, the most important thing is to be thorough and create an itemised list of all the debts you accrued over the holiday season.
2. Put a halt on unnecessary spending
While holiday sales can be alluring, if you want to pay off that Christmas debt the time to put a halt to discretionary purchases is now. Get in control of your finances by limiting outgoing expenses to necessary bills and expenditure and you’ll pay off your debts much faster and easier.
3. Make a payment plan
If you’ve racked up more debt than is feasible to pay back in a few weeks, then you’ll need to organise a payment plan. Identify how much you can part with per week (or fortnight). If you owe on multiple credit cards or personal loans, target those with higher interest rates first and work your way down.
4. Limit additional loans and borrowing
While you’re paying off the debt you’ve incurred over the holiday season you’ll want to avoid taking out additional loans, extending your credit or borrowing more money. Otherwise, you run the risk of falling into a debt spiral. Ideally, you don’t want to incur any more debt at all. While we can’t always live in a debt-free world, it’s best if you avoid further debt over the first few months of the year.
5. Create a budget for the first quarter of the year
You’ll want to pay off your debt as quickly as possible, but you don’t want to feel the squeeze for too long. Create a budget for the period from January through until the end of March, and make sure you allow yourself a realistic amount of money for things like entertainment. Allocate some money to reward yourself at the end of March for all of the saving you’ve been doing!
Having that budget laid out in front of you will act as a motivational touchstone when you’re feeling the pinch, and give you something to look forward to.
6. Consolidate your credit card debt
If your debt is spread across multiple credit cards you might consider consolidating the debt under a single card with better rates. Balance transfers can be helpful in paying off that excess Christmas spending. Not only do you have a better overall rate, but it’s genuinely easier to manage debt on one card than it is spread across multiple cards and accounts.
7. Estimate your tax return
When January rolls around we’re only six months from tax time. If your debts are considerable and you’re not sure if you can pay them back within the first quarter of the new year, your income tax return could provide relief down the track.
Calculate an estimate of what you might get back from the tax man and factor it into your debt payment plan.
8. Start saving for next year
Once you’ve paid off your debt it’s time to start saving for next year, so you can avoid the debt squeeze come next holidays.
First, work out how much you spent on gifts this time around, that can be your target. You may want to adjust based on anything different (maybe you hosted Christmas this year, but someone else is next year).
Next, work out how many months are left before Christmas. It’s as simple as dividing the amount you need by the number of months. The figure is how much you need to save per month. Easy!
9. Consider doing secret santa next year
Buying gifts for everyone you love and care about is great, but it can also be expensive. One way to avoid Christmas debt in the future is to participate in a Secret Santa gift exchange.
Everyone in your family or friendship group picks someone’s name out of a hat. Working on an agreed upon budget, gifts are given anonymously. Not only is it a lot of fun, but it seriously reduces the amount of spending required on holiday gifts. That’s one surefire way to avoid going into Christmas debt next holiday season.
By following these 9 simple steps to pay off Christmas debt you’ll not only provide yourself with a little financial relief, but also set yourself up for a debt-free Christmas next year!