It’s a big question all on its own, especially when the budget is tight. (And whose isn’t?) Small or large, every debt needs to be managed to prevent it from snowballing out of control.
Small debts are easier to manage. Just hold steady with your payments – making sure that the interest doesn’t get away from you. On the flip side, larger debts can be tricky to handle, especially when you have debt in several places.
When it comes to holiday debt, the key is getting it paid off as soon as possible and keeping that interest low.
1. Know how much is left
Learning what you’re working with is the first step to managing debt. Make a list of all your debts and include the total amount of the debt, creditor, interest rate, due date, and monthly payments.
When everything is in one place, it’s easier to look at the big picture and start balancing short and long term goals. Update your list every month as the total amount of debt changes.
2. Prioritize your debts
Credit cards are a great place to start paying off debt, since credit cards have higher interest rates than any other debt.
When paying off debt, it helps to start by tackling the debt with the highest interest rate. This way, your debt doesn’t end up costing more in the long run.
Use your debt list to rank and prioritize your debts. You can also take the “debt snowball” approach and start by paying off the smallest debt first, rather than the debt with the highest interest rate.
It may cost a little more in the long term, but crossing that debt off your list can boost your confidence and encourage you to keep going!
3. Create a bill payment calendar
A bill payment calendar can be helpful for avoiding late payments (or forgetting payments all together).
Write the amount of each bill payment on your calendar after the due date. Next, fill in the date of each paycheck. You can also use your bill calendar to track your paychecks.
4. Be accurate
And speaking of paying on time, avoid delays in your payments at all costs.
Delays in payments make it even more challenging to pay off your debt. You’ll need to pay a late fee for every payment that you missed, which is more money out of your pocket. If you miss two payments right next to each other, you might even see a rise in your interest rate.
If you forget to make a payment, do not wait till the next due date to make it! Instead, call and explain the situation. Then, make your payment as soon as possible.
5. Keep an emergency fund
Life happens. Sometimes, you might have less income than you expected, but this doesn’t need to wreck your debt management plan.
An emergency fund can help you keep your payments for debts and normal expenses on track, even when you’re dealing with some unexpected financial hardship. $1,000 is a great place to start, if you can swing it. If not, just start with any amount you can stick in a savings account and not touch.
With an emergency fund, the ultimate goal is to have 3 to 6 months of expenses covered with the money in your account.
6. Make those minimum payments
When you’re trying to manage debt after the holidays, you want to make larger payments on debt to get ahead of the interest rates.
However, if you can’t pay more, make sure you’re making the minimum payments. Minimum payments may not give you a lot of momentum, but they help you dodge late fees and avoid dings on your credit score.
7. Consider consolidation
Managing debt after holidays is especially tricky when you already have other debts. In this case, check out a debt consolidation loan. It’s one of the best ways to manage multiple debts, since you don’t have to juggle different interest rates, payment dates, and amounts.
Make sure you use a nominal ROI on a personal loan to consolidate – Freedom Debt Relief can help you handle the more technical aspects of debt consolidation.
8. Stick to your budget
After the festivities are over, keep an eye on where your money flows in each month. Make sure that every penny is going towards helping you achieve your goals.
While you’re trying to manage debt after the holidays, try to keep your budget a little tighter than normal, and plan to reward yourself in a big way after those debts are all paid off.
9. Hold on to little luxuries
After the indulgence of Christmas and New Year, you might worry about how to get your finances back on track. Will you need to go with a bread-and-water type of budget? Cut out all of the things you enjoy?
Of course not. In fact, when you’re handling post-holiday financial stress, holding onto your little luxuries becomes more important than ever.
The key is cutting back a bit and taking your time with them. Do you just love going for coffee at a coffee shop? Switch to once a week instead of once a day. Make that once a week trip a real event – stay for several hours with a book or tv show and soak in the ambiance while you enjoy your favorite drink.
10. Look for cheaper alternatives
You’ve probably set a few New Year’s resolutions, and reviewing your cost of living fits right in with those. Load up a few comparison websites and look for better deals on insurance, utilities, streaming services, and more.
Challenge yourself to bring down the cost of everything you buy, even if it’s just by a couple of cents. You’ll be surprised at how quickly everything adds up!
11. Return or sell unwanted presents
It might sound strange, but we all get Christmas gifts like this. Either you already have it, you didn’t like it, or someone double-gifted something to you. These can be sold or returned to earn some extra cash. Then you can put that money towards managing holiday debt.
12. Stay healthy
While it’s important to get finances back on track, we’re also only human. That means it’s crucial to take a back step after the holidays and check in with ourselves. Christmas can make any financial challenges that you might be having to feel more out of control, leading to feelings of anxiety and depression.
Paying off debt is important, but it’s not as important as your health. Make sure you’re taking care of your mental and phsyical health, and don’t hesitate to talk to a professional if you need help.
13. Start planning for next year
It’s never too early to plan for next Christmas, especially if you need to manage debt. Start saving for next Christmas now, even if it’s only a little bit. Better yet, start investing and let your money make money!
How to manage debt after the holidays
Debt can feel overwhelming, but you can do this. Holiday debt is often something you take on to show others you care about them, but managing debt is a way to show you care about yourself.
Drowning in debt keeps you constantly anxious, stressed, and just a little too far from your financial goals. Paying off that debt can allow you to start taking better and better control of your finances, so you can meet goals you’ve always dreamed of.
Here at Penny Calling Penny, our holiday articles are only a part of our growing library. We’re dedicated to helping you learn to manage your money, no matter where you’re at on your financial journey. Subscribe to our newsletter so you never miss a Penny, and we’ll see you next time!