If you’re like 36% of people in the U.S., you may be facing holiday debt. A recent survey shows that almost 90% of that number used a credit card or store card to make holiday purchases.
No one likes to start the new year off in debt. To help you combat high balances and interest rates (20.30% as of December), here are five tips for paying down holiday debt.
1. Don’t put your head in the sand
The best way to approach your debt is head-on. By going through all your finances, you can get a better look at how much you owe, how much you’re paying in interest, and how much you have at the end of the day to put toward repayment.
2. Create a budget
If you haven’t already, make a budget. This can help you plan out repayment more effectively. While there are a number of different budgeting systems, one system is the 50/30/20 rule. This dictates that you put 50% of your monthly income toward your expenses, 30% towards entertainment and recreation, and 20% towards savings and debt. Try a budgeting app, like Honeydue or PocketGuard, to help you track your expenses.
3. Make your highest interest rate card the priority
Paying down your credit card with the highest interest rate more aggressively can help save you money over time. The debt avalanche is one such method that proposes paying the minimum payment on all your cards and using the bulk of your repayment dollars toward the card with the highest interest rate. Once that’s paid down, you move on to the next card with the highest interest rate.
4. Offset your income with a side job
While cutting back on recreation and entertainment can help save more dollars, you may want to look for extra work to help you pay down your debt more quickly. Any additional funds given as gifts may also be applied to your debt to help get you back on track.
5. Get credit counseling
Trying to pay off debt can seem like an endless feat. Talk to a credit counselor through a certified credit counseling agency to get more help. They can help you budget, provide financial literacy, and set financial goals. If you enroll in a debt management plan, your counselor will work with your credit card company to reduce your interest rate and consolidate your debt into one payment, all to be paid off in three to five years.
By carefully planning out your budget and repayment, you’ll be able to get back on track for a financially healthier new year.
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