Powerful steps to paying down holiday debt

Did you go a little overboard with holiday spending this year? You’re not alone.

It’s hard to resist the temptation to overspend when buying gifts for your family and friends, especially when so many retailers offer their deepest discounts of the year. So, if you find yourself suddenly buried under a mound of credit card debt, here are a few methods to dig yourself out:

Add up your seasonal costs
The first step is to calculate the exact amount of your holiday debt. This is helpful for a couple of reasons. For starters, you need to know your target number so that you can make a repayment plan.

But it also lets you establish a limit for Holiday seasonal spending. Provided your budget is the same for this year’s holidays, you can either plan to save more or spend less on gifts than you did last year.

Tackle higher-interest debt first (the snowball-payment method)
Not all debt is created equal. You’ll pay more in the long run with higher interest-rate credit cards than lower-rate cards. Start by identifying your most expensive credit card balance. Then, pay the minimum on your other cards and roll the extra money into your payment for the expensive card. Once it’s paid off, focus on the next most expensive card, etc. You’ll save money by paying less interest over time and move closer to being completely debt-free.

Re-organize your budget
If you’re struggling to get ahead of your seasonal debt, you may need to take a long, hard look at your budget (and if you’ve never made a budget, the beginning of the year is a great time to start!). Can you eat out less? Make coffee at home instead of buying it every day? Identify areas where you can save and apply the extra money towards the costs of those holiday purchases.

Don’t spend more than you earn
This classic rule of personal finance is classic for a reason: it works. We all have good intentions when it comes to saving, but it’s easy to fall into the habit of using your credit card when you want to buy something but don’t have the cash.

Bottom line? If you don’t have it, don’t spend it. After paying your bills and putting money into your savings, make a discretionary budget (and stick to it!).