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9 Tips for Paying Down Holiday Debt

The holiday season can hit our wallets hard. Here’s how to help manage the extra bills.

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illustration of mrs claus being squished by credit card, holiday debt, shopping
Jade Schulz
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If you spent more than expected during the holidays, you’re not alone. A recent survey shows that more than a third of consumers take on holiday debt. And most do it without planning to. It’s not surprising; between increased prices, a long lead-up to the holidays and strong marketing tactics, there were many opportunities to overspend during the holidays. Add to that the fact that many borrowers who had their student loans paused during the pandemic have now resumed payments, making many feel stretched even further.

But now that you have the extra bills, how do you deal with them? Here are some strategies for getting rid of your holiday debt.

1. Give yourself grace

If you unexpectedly took on debt during the holidays, you may be tempted to be hard on yourself. But dwelling on the mistake may increase your stress and anxiety. So take a deep breath, sis, and let it go. Rather than beating yourself up about it, reflect on what led you here and consider what to do in the future. If you overspent because you failed to budget, you know to create a spending plan next holiday season. If you blew your budget because you accepted every opportunity to spend, you know to set some boundaries. Be kind to yourself, let it go and move forward.

2. Avoid additional debt

You can’t improve your situation while making it worse, so if you want to pay off your holiday bills, commit to avoiding additional debt. If necessary, take your credit cards out of your wallet and remove the saved credit card info from your computer and online accounts to avoid the temptation of using them.

3. Create room in your budget

You’ll need to pay more than your minimum payments to pay down your holiday debt. But if your budget is tight, this may be hard to do. One of the best ways to create room in your budget is to assess your expenses. Review your monthly budget (or, if you don’t have one, write down all your recurring bills). One by one, go through your expenses to see what you can eliminate, reduce or negotiate. You may identify some you can let go of, even temporarily, while focusing on the debt. In addition to your recurring bills, look at your discretionary spending, like eating out, clothing and entertainment. Prioritize necessary expenses and put a hold on non-essential spending so you direct that money toward your debt.

4. Find ways to increase your income

In addition to assessing your expenses, bringing in additional income will increase how much you can put toward your holiday debt. You can do this by taking on a part-time job, pursuing work on the side or working overtime. But there are other ways to increase your income, like selling items online. Another way to raise your take-home pay is to do a paycheck audit. Review your most recent pay stub for unnecessary payroll deductions like unused HR benefits. Cancel them and start getting that money back into your pocket. Additionally, if you typically get a sizable tax refund and expect to get one this year, consider adjusting your tax withholding to have fewer taxes taken out and more money in your paycheck.

5. Choose a debt payoff strategy

There are multiple ways to pay off your debt. You could follow the “debt snowball” method, which focuses on paying your debts in order from the smallest amount owed to the largest. This can be a motivating way to get rid of debt because you experience quick wins by paying off small debts. Or you could follow the “debt avalanche” method, which focuses on paying off the debts in order of highest interest rate to the lowest. With this method, you’ll pay the least amount of interest. Each strategy has its advantages, but the best one for you is the one you will stick to and follow. So consider what motivates you and pick a plan for your debt.
If student loan repayments are claiming a slice of your income, keep an eye on the shifting legislative landscape. Whether or not you are an AARP member, you can stay updated on developments using the Savi Student Loan Repayment Tool's free assessment.

6. Write your plan down

Regardless of your debt payoff method, having a written plan will increase your chances of paying down your debt. Give yourself bonus points for putting your plan where you can see it daily. Also, set a timeframe for paying your debt down. You can use a credit card payoff calculator to see how much you’ll need to pay each month to reach your time goal.

7. Ask for a lower interest rate on your credit cards

Did you know your credit card company may be willing to lower the APR you’re paying? Yup, all you have to do is ask. There’s no guarantee your credit card issuer will lower your rate, but they may be willing to if you have a long history with them, a good payment record or your credit has improved since getting the card. A lower interest rate on your credit cards will help you pay them down faster since more of your payment will go toward the principal balance rather than interest. To request an interest rate reduction, call your credit card company and explain your situation; if necessary, ask to speak to a supervisor.

8. Make micropayments

In addition to your monthly payments, make small payments anytime you can. If the week or month ends and you have money left over from your grocery shopping or another area of your budget, direct it towards your credit card payments or loans immediately rather than waiting for the monthly payment. Twenty dollars here and fifteen dollars there can add up and can motivate you to keep going. Also, put any unexpected or one-off income towards your debt. Leveraging your tax refund, bonus or other lump sums will accelerate your payoff.

9. Make it fun

Paying off debt isn’t easy, so approach it in a way that will motivate you. Build in milestones to reach, such as dollar amount increments or paying off a certain number of bills, and have a celebration each time you hit a milestone. These mini goals and celebrations will give you something to look forward to and make paying off your debt — dare we say — fun.

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