The holiday season is officially over, the decorations have come down and the presents have been unwrapped – but now the holiday blues have likely set in. And you may be even more down in the dumps this year if you’re dealing with holiday debt. But you’re not alone. In fact, according to the 2019 Experian Consumer Credit Review, Americans carry $6,194 in credit card debt on average. And around the holiday season, 36% of Americans reported taking on more debt, averaging $1,249.

If you’re over your head with bills to pay, follow these 5 steps to crush your holiday debt once and for all.

Before you can begin effectively paying off your holiday debt, it’s important to determine exactly how much you owe. Start by making a list of all the accounts and credit cards you used to make holiday purchases. 

For each card or account, make a note of how much you owe, the minimum payment required, the interest rate, and the payment date. Be as explicit as possible in your accounting so you don’t miss a payment or debt you owe.

If you saved your holiday receipts (which we highly recommend!), cross reference your accounts with your receipts to make sure you’re not missing anything, and to also make sure you weren’t charged incorrectly for any purchases. 

Once you have a clear idea of exactly how much holiday debt you owe, it’s time to either create a new budget or update your current budget. A budget shows you where your money is going so you can create a personalized spending plan. We recommend maintaining your budget using an app on your smartphone so it’ll be within easy reach to keep you on track. This is an excellent way to see all of your monthly expenses, including your holiday debts. By doing this, you’ll most likely find expenditures to eliminate or cut back on.  you’ll  also get a clear picture of what amount you can afford to pay back each month. 

And although it may be too late this holiday season, it’s never too late to get a head start on next year by planning out your holiday budget in advance. 

Now that you have a clear idea of what you owe and what amount you can manage to pay back monthly, it’s time to choose your payoff method.

How much you can afford to pay back each month will likely help you determine what payoff method you choose. There are two main payoff methods: the snowball method and the avalanche method. 

The snowball method focuses on paying down your smallest debt balance before moving on to larger ones. While focusing on your smallest debt first, you’ll still be making the minimum payments on all other debts. Once that small debt is paid in full, take the dollar amount used for that debt and roll it into the next smallest debt. Continue until all debt is paid off. This method can give you quick rewards and teach you discipline. 

The avalanche method focuses on paying the loan with the highest interest rate first. You’ll still be making the minimum payments on smaller interest loan debts, but you’ll focus on paying off the highest interest rate debt first. Once your highest interest rate debt is paid off in full, take the dollar amount used for that debt and roll it into the next highest interest rate debt. This method will ultimately result in paying less interest over time, but it requires discipline.

If you’re dealing with more debt than you can manage, especially if it’s spread across multiple high-interest credit cards, debt consolidation may be a good option. Debt consolidation combines all your credit card and unsecured debt into one payment – no more worrying about multiple due dates from different creditors. All qualifying debts are put into one manageable monthly payment with a debt consolidation plan. There are two types of debt consolidation loans: 

    • Credit card balance transfer – good for those with a good or high credit score. 
    • Fixed-rate debt consolidation loan – better for those with a fair or lower credit score.

Credit unions typically offer lower rates on debt consolidation loans which can help you pay down your higher-interest debt faster. If you choose debt consolidation, it’s important to maintain your budget and monitor your spending habits. 

Any change we undertake – from losing 10 pounds to paying off debt – takes dedication, discipline and commitment. Remember, with every step you make towards your goal, you’re winning. Sometimes we fall short and overspend – and that’s okay. It happens; we’re human, after all. If you slip up, be kind to yourself and get back on track.

It helps to have a partner who can guide you through the ups and downs of becoming debt-free. Credit unions partner with you and can provide a personal guide to help you achieve your financial goals.