Haunted by Christmas Debt? Follow These 4 Steps!

Holiday Debt! How to eliminate it!

Holidays, especially Christmas, often end on a sour financial note due to overspending – primarily on gifts. After the dust has settled, the Christmas tree has been disassembled and all of the Christmas decorations put away until next year, dreaded Christmas bills start to appear in our mailboxes, and there is no running away from them!

So what do you do in order to pay off your Christmas debt and put a good system in place to prevent you from going “in the hole” over Christmas gifts next year?

Set a deadline

Once you know the entire amount you need to pay off, set a deadline by which you’d like to pay all of your Christmas bills off. Having a set deadline will allow you to calculate what monthly payments you’ll need to make in order to wipe out your debt. You should target the highest interest bill first, while paying a minimum or slightly above minimum payment on the rest. Once your highest interest bill is paid off, assign that payment amount to the next highest interest bill. Keep going until all of your bills are paid in full.

Adjust your spending

One big mistake while paying off Christmas bills is making only the minimum payments. If your current lifestyle can only handle minimum payments, than you’ll have to adjust your lifestyle for a season in order to make headways on your bills.  If you don’t do that, you’ll run a risk of having unpaid Christmas debt when the next Christmas rolls around! Combine that with credit card debt you’re accumulating on an ongoing basis and pretty soon you’ll find yourself spiraling out of control, unable to meet all of your debt obligations.

So take a look at your current spending and find 2-3 areas where you could cut out $20-$30 a month.  That additional $60-$100 can help you tremendously as you tackle your debt.

Plan way ahead!

One sure way to prevent from accumulating Christmas debt is to start planning way ahead. Now that you know how much you spent this year, use that amount as a base, divide it into 10-12 months and start setting that monthly amount aside in an envelope or an account you don’t normally use. Let’s say you spend $700 this year on gifts. This means you should be setting aside $60-$70 every month in order to have enough cash set aside for the upcoming Christmas.

What you could also do is to look for deals throughout the year and use that saved cash to purchase items ahead of time. This way you can avoid the Christmas rush and use time to your advantage!

Use technology to your advantage!

It’s no secret that technology has been a great friend to all who need help organizing and tracking their finances and who are pursuing a debt-free life.

If you are still living from paycheck-to-paycheck wondering where all of your money is going every month, then it’s time for you to find a budgeting software or an app that will help you get and stay organized. Budgeting software that links with your bank and credit card accounts and tracks your every financial move will not only help you gain visibility into where your money is going every month, but it will also help you plan and adjust your spending so you can reach your financial goals.

If you’re a visual person and like to check things off a list, then using a debt roll down calculator (there are a ton of free ones out there) will help you create a debt payoff plan that you can print out, post on your fridge and check off every payment you make. You’ll enjoy seeing every payment checked off, and having this visual reminder may help you get inspired to make double or extra payments!

So don’t let the ghost of Christmas debt haunt you forever. Follow these 4 simple steps and you will not only eliminate your holiday debt faster, but you’ll be better prepared to meet next Christmas with cash in your hands!