Unhealthy Holiday Debt

Advertisers take no prisoners when it comes to pushing the holidays on us these days, which can make it easy to get sucked in to overspending. Though it’s great to be generous with your loved ones, if you’re able, a lot of us just do too much. Period. Going into a lot of debt for the holidays is not a good idea. Often called the Holiday Hangover, lingering debt from this most wonderful time of the year can be a major financial burden all year long. Here are tips to get rid of it fast.

Step 1: Assess the damage

Put a figure on it. You know what you bought in terms of gifts. And just to have it hit home even further, add another 20 per cent on top of the cost of gifts for various Christmas-related things like extra eating out at the mall, extra food purchases, postage, shipping, and gas.

Once you have a dollar figure in mind, you can act. It’s the old adage: “If you can measure it, you can manage it.” Own the problem. It’s time to face up.

Step 2: Put your credit cards away

Credit cards are tough to use if you don’t have them at hand. If you plan to keep them, at least put them in a locked place or give them to someone you trust to keep (a financial advisor or a family member). Repairing your holiday debt will not work if you keep adding to the problem. A better idea is to destroy and cancel them altogether. Or at least all but one emergency card.

Step 3: Make an austerity plan

Nothing good ever came without some pain. You need a good two months of a personal austerity program to reign in this little beast. Only the essentials for 60 days. Watch Netflix or read a good book or play with your kids. This period will also serve to help you avoid doing this again next year. You’ll remember it. The time will fly by.

Step 4: Pay your debts first

Instead of paying bills immediately when you get each paycheque, make a point of setting aside a significant amount for your credit card with the lowest balance. This is an unorthodox approach that differs from traditional personal finance advice, which tends to focus on chipping away at credit cards with the highest interest rate. but it works because it brings with it an early sense of accomplishment. Paying a card off in full is a tangible gain that you will actually notice. Many people also feel stressed about the number of cards they are servicing. This knocks one out of the equation earlier. Make sure your payment is significantly more than the normal minimum, otherwise you’ll be paying primarily interest. 

Step 5: Stay out of shopping zones

I can’t emphasize this enough: seeing is temptation. Even if you’ve been good enough to put your cards away or destroy them, you will spend if you have the opportunity. So don’t put yourself in that situation. You are in repair mode—you had your fun and now you need to pay up.The above advice will help, but only to an extent.

You need to take care of your mental health. Prepare in advance and start a Christmas fund at the end of the summer. There is no sense in going into debt and causing a lot of mental stress and anxiety. Remember your loved ones will love you no matter what and should understand not digging yourself into debt this holiday season.

Matthew Clarke