How to Fight Off Holiday Related Debt

Avoid BNPLs

Although this may seem counterintuitive, the best way to combat current trends of holiday day are to stop making use of Buy Now Pay Later services like Affirm, Klarna, Afterpay, etc. More recently, these services have caused many Americans to use more credit, simply because they live “outside” of a consumer’s standard budget and are an appealing offer which doesn’t go through the typical credit card purchase process. If you purchase a big-ticket item with these services, make sure you are accounting for them on your budget! Otherwise, you are very likely to overspend, since these newer services are not “categorized” as “inclusive to your budget”.

Alternatives If You Are Short on Cash This Year

There are multiple ways to earn extra holiday cash this season, However, if that isn’t a possibility you can try re-gift things you have in your house. We all have a plethora of excess gifts/items laying around, now is a great time to consider re-gifting some of them. In addition to this, if you are big on creating, consider trying to make a gift this holiday season. A lot of people actually appreciate homemade gifts more than a typical store-bought gift. This can also be a great way for you to release some creative energy, de-stress, and showcase your creative capabilities.

Bonuses/Benefits

Make use of any employer bonuses or tax refunds to knock out a big chunk of holiday debt while you have the cash at hand. No one likes a Grinch but sometimes sacrifices have to be made. Unfortunately, many Americans carry holiday debt for a significant length of time. If you receive an outsized tax return make sure to make use of these funds so that you stop paying daily interest on your credit cards! Any other Holiday bonuses you get can also be used to fight off holiday related debt as well. It might mean there’s a more of a Grinch in your home this time of year and you’ll have less presents under the tree but at least you’ll have gotten the credit card monster off your back. He’s much worse for your financial health in the long term.

Payment Strategy

The debt snowball method has continually been proven to be one of the most effective payment strategies for consumers with a large number of accounts. Psychologically speaking, paying down smaller balance accounts and getting them removed from your budget altogether is the most effective way to make progress on credit card debt. This strategy helps incentivize paying down debt and also helps by simplifying your financial situation (fewer accounts with balances means fewer payments/bills each month). Although a debt avalanche can save more money, for consumers with a large number of accounts the snowball method is typically ideal.

Savings Tips

Spending after the holiday season tends to die down for many consumers. Since we are spending less of our disposable income on gifts, we can use this to our advantage and save more during the beginning of the year. Although this requires some sacrifice, if you can save more during the beginning of the year, it’s always to your advantage! Think of this as “savings for your future”. Eliminating credit card debt grants consumers “peace of mind”, so if you can sacrifice now, you will be able to sleep better for the rest of the year.