When can you wipe out your holiday debt? According to recent reports, in the first two weeks of the holiday shopping season, the online spending of Americans reached around $21.7 billion. Despite everything that happened and the way most of our finances were shaken by the pandemic and recession, people still spent more than they did the previous year.
Of course, this could be because most people aren’t going anywhere nowadays. Instead of going outside to shop, they just opted to buy stuff online. But the bottom line is, the amount of money spent online is still huge. Since it’s online, there’s a high chance that people used credit to pay for it.
That means it’s safe to assume that the debt of Americans has grown over the holidays. If you’re one of those who used their credit to pay for their holiday expenses, that’s okay. But you have to know that there’s a huge responsibility associated with that. You have to pay it all back.
Fortunately for you, there are different ways for you to pay off your holiday debt. Before you choose how you’ll pay it all off, make sure you consider all the options available to you.
4 strategies to pay off your holiday debt
If you want to get serious about paying off the debt you accumulated during the holidays, make sure you get to know the different strategies you can use.
Here are 4 options that you can start with.
Increase your debt payments
The most obvious strategy that you can use is to increase your debt payments. If you can build your debt repayment fund, you can chip away at your balance faster. The more you pay towards your debts, the faster you can get out of debt. With a shorter payment period, you get to save a lot of money in terms of interest. So if you have mostly high-interest credit card debts, paying off your debts faster is a really good idea.
If you can finish paying off your holiday debt, you don’t have to worry about it for the rest of the year. You might even have enough extra money to save for your next holiday. That way, you won’t have to rely on debt. You can just use cash to pay off your holiday expenses. You’ll be free from having to worry about debt payments next year.
That should be a great way to start your year financially.
Tweak your spending budget
Another strategy you can use to pay off your holiday debt is to tweak your spending budget. Take a look at your budget plan this year. It’s the perfect time to check and update your budget. Make sure it’s aligned to your current financial situation and whatever plans you have for the rest of the year.
While you’re doing that, see where you can cut back on your expenses. The goal is to increase the money left over from your income. The less you spend each month, the more you can contribute towards your savings. The more you can afford to increase your monthly debt payments.
But that’s not the only benefit. If you get into the habit of being cautious about how you spend your money, you’ll become a smart consumer. It’s easier for you to control how you spend your money. The chances that you’ll land in the same situation again will be very small. You’ll know how to handle your finances so things like holiday debt will no longer be a problem.
Find a side-gig
While cutting back on your expenses is a good idea, it will be limited. So if you really want to pay off your debt faster, try to increase your income. Find a side-gig that can supplement what you’re already earning. There are many options for you to do this.
You can start by talking to your superior or your employer. Ask them for a raise. Or you can request additional shifts or more projects.
There’s also the option to get a second source of income. In truth, this is probably better because it diversifies your income. In case something happens to your day job, you don’t have to worry. You still have another source. But what side-gigs can you get?
There are a lot of online jobs you can use to supplement your income. Or you can capitalize on what you’re good at – may it be arts and crafts, carpentry, cooking, baking, or even gardening. Use it to earn extra during your free time. Any income you earn can be used to get rid of your holiday debt.
Choose a debt relief program
Finally, you can also get a debt relief program to make your monthly payments easier to meet. There is usually a debt solution that fits your financial situation.
Like if you have a good credit score, you can opt for debt consolidation loans to lower your interest rate. This will help you save money – at least on interest payments. You can also use a balance transfer card to remove the interest rate for a couple of months to a year or so.
If you need a debt reduction because your income is not enough, aim for debt settlement. This involves negotiating with your creditors and lenders to allow you to pay only a portion of what you owe. This will help you save a huge amount if you know how to negotiate properly.
There are other options to choose from. Make sure you do your research so you’ll know what they all are. The more you know, the better chances that you’ll choose the right one.
Why you should pay down your 2020 holiday debt
You might be wondering, why should you pay down your holiday debt so fast? Is there really a need to completely pay it off in a short amount of time?
Yes. There are actually 2 good reasons to do that.
To avoid compounding your debts
First, the debt will grow because of compound interest. According to reports, the few short weeks before the holidays, Americans were already spending. They racked around $1,325 on holiday debt. This is not even the whole holiday spending. If most of these are credit card debts, the high-interest rate will make your debts grow because of compounding. The earlier you can pay it all off, the less you have to worry about the compound interest.
To focus on 2021 financial goals
Wouldn’t you like to complete your financial goals for 2021? If yes, then you have to get rid of your holiday debt. When you’re not paying off your debts, you can use that money to fund your other goals. Like if you want to buy your own house, you can get started on saving for the down payment. If you want to spend less on car-related expenses, get a fuel-efficient vehicle. You can also renovate your home so you can rent out a part of it. This will give you some passive income.
There are many opportunities that will open up for you as long as you get rid of your debts. So if you have the means to pay it off as fast as you can, then go ahead and do it.