Published on 06/11/2005

Spent too much over the holidays? Find out how to overcome post-holiday debt in the new year.

Beating the financial blues

Overcoming post-holiday debt

In January, New Year's resolutions are top-of-mind, and many people are motivated to make a change. Losing weight and getting fit are among the top resolutions, but resolving to get a better handle on debt is just as popular.

So how do you begin to tackle the looming pile of bills, and the sense of powerlessness that often comes with debt? Don't ignore the problem. Let those credit card statements be your inspiration to get your debt situation under control. It is never too late to develop a budget and start trimming debt.

Take stock of your financial situation

Develop a good understanding of your finances for a clear and realistic view of where you can cut back.

Identifying the problem is an important step to changing your spending habits. Review all your receipts from the holidays. Where did you overspend? Was money wisely spent, or in hindsight can you see where you could have cut back?
Stop accumulating more debt. Stay away from all of the post-holiday sales. If you continue to add to your debts, it will be that much harder to reduce the total balance. Putting away the credit cards may be the essential step to success. Instead, use debit cards, cash or checks. That way, you'll spend only the funds you have available now.
Create a budget. List your sources of income along with financial obligations including monthly living expenses. See our Article Library on how to prepare a budget or try our online Budget Planner.

Trim the financial fat

Separate your needs from your wants. When you reviewed your holiday spending, was every purchase necessary and on your original shopping list? Change your habits so that each purchase is planned and accounted for.

What are some easy ways to trim the fat? Examine your monthly expenses and cut out the non-essential items. For example:

Quit paying costly parking fees and use public transit.
Limit costly cash advances on credit cards.
Change from a premium cable package to a standard package.

But be realistic about what to cut. You want to be able to stick to your plan. Inexpensive alternatives might be an option rather than completely cutting out the things that you enjoy. For example, if you normally buy a coffee every day, choose to brew your coffee at home. But then treat yourself at your favorite café once or twice a month.

If you just can't seem to stop spending beyond your means, maybe it's time to acknowledge that you need help. Spending can be an addictive behavior, and credit counseling agencies can help you to manage your problem.

Put a dent in post-holiday bills

Once you've got your spending on track, how do you emerge from that pile of bills that just won't shrink?

Pay more than the minimum amount due. If you only pay the minimum amount due, it can take you many years to pay off your balances and result in significantly more interest paid. By reducing your monthly expenses you can use the extra money to make larger payments. Be sure to pay off the highest interest rate cards first.
Consider Credit Counseling. If you built up a large amount of unsecured debt (like credit card or department store accounts, or accounts in collections) refer to a credit counseling agency for help. These companies, also referred to as debt management services, work with your creditors to restructure your unsecured debts. With their debt management plan, you make one monthly payment to the credit counseling agency, and they pay your creditors. Many of the creditors who participate in the program will allow you to reduce your monthly payment and, after you establish a payment history, may reduce or eliminate your interest and late charges. Companies that offer credit counseling do not lend you money. Instead, they negotiate with your current creditors to get you debt relief.

The key is developing a realistic plan and setting an achievable goal. Whether it is to pay off a set amount of your debt per month, or to eliminate it altogether, a focused goal will help trim the holiday debt, ensuring your financial health for the future.

Read our related articles on budgeting and managing debt in our Article Library section. Remember that creating and managing a budget gives you the control you need to meet your financial goals. And if you decide to use a debt relief plan, shop carefully and compare costs.