4 Tips for Paying Off Holiday Debt
Drowning in debt from the last holiday season? Here’s how to get rid of it. Image source: Getty Images.
Though the holidays can be a wonderful time of year, they’re also an expensive period to deal with. From gifts to parties to travel, it’s easy to rack up a host of debt in December despite your best efforts to avoid it.
The problem with debt, however, is twofold. First, the longer you carry it, the more interest you’ll end up paying. Second, having too much debt can hurt your credit score -- specifically, in the area of credit utilization. To keep your score in good shape, you should never use more than 30% of your total available credit at once. If you’re carrying a $2,000 credit card balance from the holidays, and your total available credit is $6,000, you’re officially over that limit. It’s therefore in your best interest to eliminate your holiday debt as soon as possible, and move forward with a clean slate. Here are a few ways to do so quickly.
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1. Go on an expense-slashing spree
We all have the potential to limit our spending, and if you’re in debt from the holidays, it pays to seriously cut back. That could mean banning restaurant meals, concerts, and new clothing purchases until you’ve scrounged up the cash to pay your debt, or it could mean going so far as to unload a vehicle that’s costing you more money than public transportation. Either way, the key is to take a look at your budget, figure out which expenses will be easiest to reduce or eliminate, and slash enough spending to free up a nice chunk of cash each month until that debt is gone.
2. Get a second job
Side hustles are all the rage these days, and people work them for a variety of reasons, whether it’s coming up with a home down payment, saving for a vacation, or having extra spending money. If you’re loaded with holiday debt, getting a second job temporarily could put hundreds of dollars back in your pocket each month, and since that money won’t be earmarked for existing bills, you’ll have the option to apply all of it to your debt. Best of all, you don’t need to suffer through a miserable gig to earn money; you can find something you enjoy doing, whether it’s photography, web design, or food prep, and turn it into a side hustle.
3. Apply windfalls toward your debt
Many of us get cash outside of our regular paychecks during the year. You might get a sudden bonus at work, or a tax refund once you file your return. Or, you might get a string of generous cash gifts for an upcoming birthday. No matter the source of that money, using it to chip away at your holiday debt is one of the smartest things you can do with it -- even if you’d rather splurge on something fun.
4. Sell items you no longer need
One final way to pay off your holiday debt is to take inventory at home, figure out what’s lying around that you no longer need, and start collecting cash for those items. That cash can then be used to help whittle your holiday debt balance down to zero. Keep in mind that these days you can sell anything from gently used apparel to electronics to gift cards online, making it fairly easy to swap unwanted goods for money.
The sooner you get out of holiday debt, the less interest you'll accrue, and the less damage it'll do to your credit score. Your efforts shouldn't stop there. Once that debt is gone, follow the above tips to start setting money aside for the upcoming holiday season. That way you'll avoid landing in the same boat all over again.
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