They come every year: the holidays. As much as they bring joy, they can also put a significant dent in your pocketbook. And now that they’re over, for now, you might be wondering how you’re going to pay back all the debt you incurred so rapidly. Last month we talked about how to avoid falling too deep into holiday debt. This month we’re focusing more on what to do if you still have debt from the holidays.
Tip #1: Don’t file for bankruptcy.
According to the National Retail Federation, people spent roughly $1,050 toward holiday expenses in 2019. That may not seem like a lot, but according to Debt.com, $1,000 on a credit card with an APR of 18% will take over five years to pay back when you pay just the minimum. Experts advise that if you’ve racked up $5,000 in debt or more, it’s time to sit down and assess the damage.
Tip #2: Once you’ve got a good understanding of how much you owe, it’s time to set a budget. You can then decide if cutting household expenses, finding creative ways to enjoy recreation without breaking the bank, and applying various debt repayment options are viable, or if it’s time to contact a professional credit counselor. If you’re constantly worried about your debt, working with experienced professionals is your best option.
Tip #3: If you’ve decided you need help, looking into a debt management program will help you pay off your debt while avoiding the years of damage to your credit score you’d incur from filing for bankruptcy. Credit counselors will work with you and credit companies to bring down your unsecured loan payments—including credit cards, medical bills, and other types of debt —by negotiating with creditors to lower interest rates and consolidate debt into a monthly payment that is affordable to your situation.
Tip #4: Once you’ve spoken with a credit counselor and secured your way to a brighter financial future, you can also take steps to ensure that you don’t go into debt again when the holidays, or any other major event that costs a lot of money, rolls around again. Start to set aside cash each month that you can use toward spending for festivities, family, and friends, so that you don’t find yourself with a financial hangover in the new year.
Now is the time to set aside the credit cards, go on a cash diet, and embrace a new, financially savvier, and healthier you.