If you are starting off the new year with the weight of holiday debt, you’re not alone. If you’re like roughly a third of U.S. adults, you go over budget during the holiday season. According to a survey by Lending Tree, the average debt hit $1,549, spiking 24% this year compared to 2021. Start by focusing on big opportunities to save and reduce debt, instead of paying interest. The next step is to use your resources and knowledge to save and earn money to recover from holiday debt faster.
Paying off holiday debt is an achievable goal if you follow these tips:
Set a budget.
Once the new year begins, it’s important to set up a budget for the upcoming holidays to avoid building up too much debt again. For some, a budget can feel constricting, but tracking your spending can be a helpful tool in helping you understand how your money comes and goes each month. A clear budget can help you set guidelines for what you can afford to spend and help you identify areas where you could cut back. Many people utilize the 50/30/20 method, using 50% of your after-tax income toward needs, 30% towards wants and 20% toward savings and debt. There are also many of personal budgeting websites and apps that can help with budgeting, including Mint.com, PocketGuard and You Need a Budget. Most people spend too much without knowing where their money really goes, so by creating a budget, you can stay on track towards a financially healthy future. 
Prioritize one debt over another.
Creating a strategy can help you stay organized and motivated to tackle that holiday debt. For the fastest and most efficient approach, try the Debt Avalanche Method. Using this method, you start with the balance with the highest interest. This method ultimately saves time and money because balances with higher interests tend to grow faster. Here’s how it works:
- Organize your debts starting from the highest APR (which includes both interest rates and fees) to the lowest.
- Make the minimum payments on all of your accounts but pay extra towards the highest APR account any time you can. By paying those off first, you slow the growth of your balances which earns more interest.
- Once you pay off the highest APR debt on your list, move on to the next debt on your list.
In summary, the avalanche method is considered the fastest way to pay off debt and save money… even though it lacks that feeling of achievement that comes with quickly paying off your cards with the smallest balances first.
Consider debt consolidation.
If you have substantial credit card debt that just gets heavier after the holidays, debt consolidation might be a good option for you.
Debt consolidation involves taking out a personal loan to pay off several existing loans or credit card debts. You can combine holiday debt from other credit cards or personal loans you may have taken out into a new debt consolidation loan. This means you can address all your debt with one solution, saving you time and money. Similar to balance transfer cards, the goal is to move your balance from one high-interest loan or credit card to a new loan with a lower monthly payment. In the case of balance transfer cards, however, you must qualify for a card with a lower interest rate to get real value out of the process. But with debt consolidation loans, even if you don’t qualify for a substantially lower interest rate, you may still be able to negotiate a lengthier repayment period that will bring down your monthly payment. Rather than keeping up with three, four or five different payments each month (including ones that fluctuate), you can instead make just one, set-in-stone payment for the entire loan term. This can make it easier both to remember and budget for.
At Hippo Lending, we’ve helped hundreds of healthcare professionals reduce their financial burden through debt consolidation. We know first-hand the adverse effects holiday financial stress can have on an individual’s life. Get started with debt consolidation now by visiting this link.
