Smart Ways to Tackle Your Holiday Debt in the New Year

The holiday season is full of joy and celebration, and - if we’re being honest - sometimes a little too much spending. Between gifts, travel, and festive gatherings, it’s easy for holiday cheer to turn into a financial headache once the new year rolls around. If your credit card balance is higher than you’d like or minimum payments feel overwhelming, you might be searching for a solution.

Use these tips to help manage holiday debt so you can work toward other financial goals.

Consider a Balance Transfer

A balance transfer involves moving high-interest debt to a new loan or credit card offering a lower interest rate. You can transfer one account balance or use the credit limit to consolidate debt. Either way, balance transfers help ensure more of each payment you make goes toward reducing your principal balance rather than paying high interest charges. 

Create a Debt Repayment Plan

A debt repayment plan provides a roadmap to get out of debt by a specific date. It lists every single debt you owe, from credit cards to student loans, organized by their balances, interest rates, and minimum payments. When you see the full scope of your financial obligations, you can then choose between two popular payoff strategies: the debt snowball (paying off the smallest balances first for psychological wins) or debt avalanche (targeting the highest interest rates first for maximum savings). 

Gather all your debt statements. Use a debt payoff app or create a spreadsheet to list each debt’s details. Then select either the snowball or avalanche method based on whether you’re more motivated by quick wins or maximum interest savings. 

Use the Debt Snowflake Method

While holiday spending is seasonal, the debt snowflake method is a year-round strategy. It involves capturing small, unexpected savings or windfalls throughout your daily life and immediately applying them to your debt. Even tiny amounts of money can make a significant impact when consistently applied to debt reduction over time. Every small win adds up to create meaningful progress in your debt payoff journey, similar to how individual snowflakes can accumulate into a substantial snowball. 

Be on the lookout for small savings opportunities throughout your day (using coupons, skipping a coffee purchase, earning cashback), and immediately transfer these amounts to your debt payments rather than letting them get absorbed into your regular spending. 

Pick Up a Side Hustle

A side hustle is any additional income-generating activity you can pursue alongside your primary job to accelerate your debt payoff journey. This extra income creates a powerful debt-fighting tool because it’s not already committed to existing expenses in your budget. Adding a side hustle provides dedicated funds that can be used exclusively for debt repayment. 

Make a list of your marketable skills, available time slots, and potential opportunities like freelancing, delivery services, or online tutoring. Commit to applying 100% of this extra income to debt payments. 

Avoid New Debt

Avoiding new debt means committing to a cash-based lifestyle while actively paying down existing obligations. This helps break the debt cycle that impedes financial goals. A strict “no new debt” policy is essential to successful debt repayment because it ensures all your debt reduction efforts are moving you forward rather than just keeping you treading water. It might help to remove saved credit card information from online shopping sites, freeze or cut up credit cards if necessary, and commit to paying cash or using a debit card for all purchases.

Push the reset button on your finances by paying off holiday debt ASAP. Discover more ways to improve your finances this year by exploring various resources and topics on our articles page.