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MVCU, debt, holiday, financial
Home / Tools / 5 Strategies to Combat Holiday Debt
5 Strategies to Combat Holiday Debt on 1/4/2021

5 Strategies to Combat Holiday Debt

Now that the holiday season is over, are you dreading the arrival of your credit card bills? Many people do most of their holiday shopping with credit cards—and the totals sure add up quickly! Here are 5 strategies to deal with the financial aftermath from Christmas shopping and prepare a plan for this year’s holidays.

1. Make a List

Start by making a list of all of your debts, including credit cards, store cards, car payments, and loan payments.  For each debt, list the interest rate, monthly payment amount, and the current amount owed. Review your list and make a note of which debts have the lowest balances, and which have the highest interest rates. Which debt would be the easiest to eliminate in the fastest time if you paid just a little more than the minimum payment each month? If you can swing some extra toward this debt while still paying your other debts on time—go for it!  Soon you’ll have one less debt on your list and you can then put the money you would have spent on that monthly payment toward your next debt to knock that one down, too.

2. Create a Budget

Creating a budget might feel like a chore, but it can actually be very helpful. Go through your last few months of banking statements and make a list with categories and the amounts you’ve spent for each, (EX: groceries $600/month). If you’re using MVCU’s online banking, you can use the included budgeting feature to make this even easier! (See our How-To videos for Creating Budgets and Savings Goals)

Once you have everything listed out with categories and the amount you normally spend for each category, it’s easier to figure out where you can make some cuts. Are you eating out a lot? Do you need that daily coffee from Dunkin’s?  If you identify something you can easily cut from your budget (even temporarily), you can use those few extra dollars saved every day to apply extra to the monthly payment of your debt.

3. Extra Payment

Wouldn’t it be even better to make a larger extra payment? Did you get a holiday bonus or are you expecting a tax return? Plan on paying off a small credit card or making some larger payments over the next few months to cut down your debt balances. Eliminating even one debt will free up extra cash in your monthly budget to help you pay off your other debts.

4. Plan Early

Now’s the perfect time to create your savings plan for the next holiday season. How much money did you spend on holiday gifts, decorations, food and travel this past year? Is that a comfortable amount, or would you like to spend less next year? After you decide on your planned holiday budget, set up a separate savings account to hold your holiday funds. You can set it up so that some of your paycheck will be direct deposited into your holiday savings account each pay period. You’ll find that your holiday savings will add up quickly, and because those funds don’t hit your regular checking account, you’re less likely to miss them.

5. Consolidate Debt

Looking at your list of debts, do you have one or more that have interest rates that are higher than you’d like? It’s quite possible that you could save money on interest and have a lower monthly payment if you consolidate your debt. You’ll also enjoy making just one monthly payment instead of paying several debts each month. How can you reap these benefits for your budget? Consolidate your debt with a debt consolidation loan or personal line of credit. Get more information today!

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Category: Budgeting & Debt Reduction



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