When I was a kid I remember being so depressed the day after Christmas, knowing Santa would not make a return trip for some 364 days. As a grown up, I developed new reasons to become depressed after Christmas: bills!
Fortunately, in the last couple years we have managed to get a handle on our Christmas spending. But it hasn’t always been that way. Early in our marriage we bought presents for everyone under the sun (and to make matters worse, I married into a large, extended family). I guess I was suffering from “new son-in-law” syndrome. The symptoms include overspending around the holidays in an effort to impress your new half of the family.
The years of overspending at Christmas were not a total loss, as we did learn some debt reduction tactics out of the exercise, and it did manage to cure our mega-consumer habits. So if you find yourself preparing to dig out from holiday bills, I offer the following tips I’ve collected along the way.
Take an inventory of the damage. This first step is by far the most painful. To devise a game plan for digging out of holiday debt you must first figure out how deep you are buried. I suggest firing up a spreadsheet on the computer, or even dragging out a legal pad and pen, and listing each of your credit cards. Update each card’s balance with current information from their website or voice response unit (you can wait on statements to roll in, but if you are already anxious I recommend getting a jump start).
Use extra savings to pay down debt. If you went a few hundred dollars over budget, and have that money in savings, I recommend transferring some money around to pay off the debt. Only take this route if your savings balance is high enough to pay off the debt and leave some for emergencies. The last thing you want to do is clear out all of your savings, because as soon as you make the payment you will encounter an emergency–guaranteed.
Rework your debt snowball plan. If you have racked up more debt than you can pay off in one swoop then you will have to come up with a debt snowball plan. Line the balances up smallest to largest and pay minimums on all but the smallest. Throw every single bit of “found” money in your budget at the smallest debt until it is gone. Yes, that includes the money your great-aunt slipped into your Christmas card.
If you racked up quite a bit of high-interest debt, such as credit card or store card debt, consider a low-interest consolidation loan to pay off the high-interest debt and then snowball the loan. If you go this route, be sure to close out the store card accounts and cut up the credit cards or you risk going right back into debt.
Do not allow history to repeat itself. When your debt snowball has completely melted turn your attention to saving some Christmas cash to spend next year. Set up a dedicated savings account and funnel a little money there each paycheck throughout the year. By November you will have a few hundred dollars to spend on Christmas, saving you from post-holiday debt blues.