Whether we like it or not, the holiday season is undeniably commercial. In an effort to show our loved ones how much we care, many of us dig ourselves into a financial hole that becomes increasingly more difficult to dig out of. While 63% of Americans say that Christmas is a holiday that brings them joy and excitement without much stress and worry, that might not be so true after all of Santa’s gifts have been opened and our next credit card bill arrives in the mail. Paying off that holiday debt can be a struggle, but it’s certainly not impossible to do, even in a short period of time!
In 2017, the average amount of credit card debt per U.S. household came out to $6,662. And in a recent study from MagnifyMoney, the average American is saddled with a little over $1,000 coming off the holiday season alone. (Yikes!) According to that study, that figure is actually a 5% increase just over the previous year alone. That means Americans are spending more each Christmas season with many consumers struggling to get rid of credit card debt in the new year.
On a national scale, the statistics are staggering. Data from the Federal Reserve indicates consumer debt in the U.S. as a whole reached $3.4 trillion in 2015 and that number only continues to increase. It’s no wonder that approximately 50% of consumers surveyed said it would take them three months or more to pay off their credit card balances they racked up from holiday spending; in the meantime, they’ll probably be accruing additional interest charges. If this scenario sounds familiar to you, you’ll want to pay attention to the following tips:
Create a Budget and Prioritize Debts
The sad truth is that most Americans don’t have a comprehensive budget for all their spending. That’s why it’s so easy for costs to creep up and for things to get out of hand quickly. If you don’t yet have a budget, you need to create one. This will allow you to see exactly where your money is going and where you can cut back if necessary. While you definitely shouldn’t choose to pay off these debts in lieu of paying your mortgage or utilities, you can likely zero in on unnecessary spending (like ordering takeout, for example) so that you can put money towards those debts a lot quicker.
Consider a Side Hustle
It seems like everyone has a side hustle these days, and it’s easy to understand why. Many jobs don’t really pay a living wage, so a lot of people cobble together a few different endeavors to make ends meet. If you have a marketable skill or have the ability to take on a second job, this can help you pay off those bills much more quickly. Even just a couple of shifts per week at a local eatery or a couple of hours every day running your online craft business could make a difference. This can even allow you to start saving for next year earlier on.
Explore a Balance Transfer
Of course, you should ideally make more than just the minimum payment listed on at least one of your credit cards; this can allow you to avoid paying more interest over a longer period of time. If you have multiple credit cards and outstanding balances on more than one, you’ll need to prioritize paying off the ones with the highest interest rates first. But you also may be able to consolidate your credit card debts onto a single card. For this to be effective, that card should ideally have a lower interest rate. If you have a fairly decent credit history, this may be a likely option that can make your debt a bit less overwhelming and a lot more feasible for you to pay off in a shorter timeframe.
Sell What You Don’t Need
Obviously, you shouldn’t feel like you need to sell your prized possessions to be free of holiday debt. (If you do, that’s a different financial conversation.) But you may be holding onto things you no longer need but could get paid a pretty penny for. Selling some gadgets, for example, could make a big dent in your debt. If you have old smartphones, tablets, or laptops in your possession and they still theoretically work, you could trade them in through a buy-back program or sell them on eBay. You can also sell clothing and other items on Poshmark, Facebook’s marketplace, LetGo, or other platforms. There are even websites where you can sell unused gift cards for a slightly discounted rate. Go through your drawers and closets to see if there are resources you aren’t tapping.
Be a Savvier Shopper
It really does pay to save for holiday purchases early on. Even when you’ve paid off these debts, you may want to continue with these tips to ensure you’re in better financial shape when next year rolls around. Of course, you should stick to your budget so that you don’t go crazy with Christmas spending. But you can also use cash-back portals, apps, browser extensions, and other online shopping tools to ensure you’re actually getting the best deal when you spend. Instead of opening yet another credit card to save 20% on your purchase, look for these free services that won’t hurt your credit or give you an opportunity to spend what you can’t afford.
Financial security is something countless Americans are seeking, but it starts with being honest with yourself and your spending habits. If you know you spent too much in December, you need to take a good, hard look at the decisions that led to that outcome and take steps to rectify it sooner rather than later. While you may have to cut back for a little while, you’ll likely find you aren’t missing that extra trip to Starbucks so much before long. And ultimately, giving your loved one an overly extravagant gift isn’t worth the financial hardship and emotional stress!