Having a post-holiday financial hangover? Assess the damage and come up with a plan.
Did you go a little overboard spending money during the holidays? Did you set yourself a budget only to blow it off when some big-ticket items went on sale?
Many of us went a little crazy this holiday season. For some, it may have boiled down to guilt (if we can't see friends and family, we should at least be generous on the gift-giving front). For others, it may have stemmed from a desire to compensate for the ridiculous year that's been 2020. But either way, if you're coming out of the holidays with a pile of debt and mounting stress levels, here's how to recover fairly quickly.
1. Assess the damage
Maybe you maxed out your credit cards in the course of your holiday shopping. Maybe the balance on one or two cards is so high, you don't know how you'll ever pay it off.
First, breathe – you will get through this. Now, figure out exactly how bad the damage is. Do you owe $1,000? $2,000? More? Nail down both the number and the source. You may owe $800 on a credit card with a 0% introductory APR that still has another eight months on it, and that's not terrible.
2. Come up with a debt payoff plan
You have two choices when it comes to eliminating holiday debt. You can work out how to pay it down gradually, for example by focusing on the debt with the highest interest first. Or you could consolidate your debt to make it easier and more affordable to pay off overall.
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For the latter, you may want to transfer your various credit card balances onto a single card with a lower interest rate (or, better yet, 0% interest for at least your first 12 months). Another option is to take out a lower-cost personal loan and use it to pay off your credit cards. From there, you'd pay off that loan in equal installments at a lower interest rate than your credit cards charge.
3. Boost your income with work on the side
Let's face it – if you earned enough to cover your added holiday expenses, you wouldn't have landed in debt in the first place. Without an income boost, you might struggle to pay off what you owe. On the other hand, if you're willing to take on a side gig, you may be able to knock out that debt quickly and move on. Think about the skills you have and what sort of second job they could lend to. If you're artistic and computer savvy, freelance web design may be something to consider. If you're great with kids, you could sign up to be a virtual tutor.
More:4 things to do when you think you can't make any more budget cuts
Taking on a second job is a bit trickier these days because of the coronavirus pandemic. You don't want to put your health at risk just to earn extra money to pay down debt. But if you're able to find a safe side hustle that lends itself to social distancing, your debt may be gone before you know it.
A lot of people will inevitably come away from the holidays in debt. If that's already happened, don't beat yourself up over it – it won't do you any good. Instead, focus on taking action. With the right approach, you can recover from your holiday binge and maybe even come out stronger on the other side.
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