Annual holidays are often an opportunity for fun, to reconnect with family and friends, to exchange gifts and, perhaps, to travel to someplace familiar or entirely new and unknown. Holidays can also be a time to overdo, overindulge, go a little too big, and, regrettably, for some consumers, overspend and get into a hole of financial debt.

It might be a small amount of debt that’s easily managed, or something that’s much larger and could take time and effort to reduce or eliminate, but if post-holiday debt is serious and a struggle to overcome, then it’s time to strategically approach how to pay it off. Depending on the amount of money owed, paying it off may require minimal or significant action and lifestyle changes, but it’s important to control debt so it doesn’t create lasting damage to your credit score

Manage debt and have a plan for paying it off

Paying off debt may not be easy or painless, but it can ultimately be successful and efficient by using a well-thought-out plan for whittling down the most expensive debt (debt with the highest interest rate and punitive fees) first and then concentrating on the less onerous debt. Following are some tips for handling holiday bills and other debts.

First, prioritize essential expenses and separate debts according to most expensive and less expensive. It will be necessary to adjust your budget to manage expenses and debt, and, realistically, you may not have enough money to pay all of your current bills immediately. Unfortunately, you may have to make several difficult decisions—

• What are essential, must-have expenses—food, water-gas-electric utilities, cellular and internet service, gasoline, medicine, rent or mortgage payments, others?
• What bills will go unpaid or not be paid in full?
• Which bills can receive a specific, minimum payment and which should have a bit more than the minimum?
• Which bills must have a full payment?

To help answer the questions above, prioritize your debts according to how big they are and how much financial interest and penalty fees are attached to them:

1. List and rank your debts by amount, starting from the largest to smallest debt.
2. For each debt, include next to the amount owed its annual percentage rate (APR) of interest (if the debt has interest) and related fees for non-payment or incomplete payment. Credit cards usually have an APR for unpaid balances, and it can be looked up on the card provider’s website.
3. Look at the combination of the biggest debts that also have the highest interest rates attached to them; those are the priority for paying them partially or completely off. Try to or make at least the minimum payments on all of your accounts, but attempt to pay extra towards the highest APR accounts any time you can.
4. Once you pay off the highest APR debt on your list, apply the money you were paying toward that account to the next highest debt and APR on your list.
5. Based on prioritizing your debts, try to create a payment schedule by determining how much time you think it will take to pay each of them off—weeks, months, or a longer time.

If it’s necessary and possible, get more money…and a loan may be helpful

Focusing on essential expenses and planning out payments may not be enough to significantly get rid of debt; it may be a difficult fact that more readily available cash is needed. If more money is needed in the short term, then consider several methods of raising more money for debt relief, such as selling unwanted possessions with value or taking out a loan.

Consolidate debt with a personal loan with a lower interest rate than other debts. One option to look at closely is taking out a loan to consolidate your different types of debt, so that for your combined debt, your monthly interest payments will be lower. This is a situation where more debt may be able to help lower your overall debt, but this option needs to be analyzed carefully to determine if it meets your specific needs. It may be that another loan would allow you to consolidate—package together—some other debts, pay them off and then have a lower total interest rate for the loan, but research this thoroughly to see if it would lower your payments. Only as example (that may not reflect current interest rates and is not a specific offer), a loan at an annual, hypothetical interest rate of 9% that pays off some or all of credit card debt may be easier to afford than credit card debt with an interest rate of 15%, 18%, or an even higher rate. Discuss with a financial advisor at your bank, credit union, or other financial services provider if a personal consolidation debt would be beneficial to your situation.

Need help to BALANCE™ your holiday debt?

Another resource for good information is BALANCE™. BALANCE™ is a financial education and counseling organization that offers free services to Delta Community members. Some of its services include credit report reviews, debt management, and information on budgeting, money management and home buying.

Visit the BALANCE™ website to learn about their education and assistance programs. Members can also speak with certified credit and housing counselors to get personalized guidance.

Want to connect with a Financial Coach about your specific situation? Chat online, e-mail, or call 1-888-456-2227 to speak with a Financial Coach today.

Note that the services offered through BALANCE™ are separate and distinct from any business conducted with Delta Community and are not guaranteed by, nor are they obligations of, the Credit Union.

More free advice on managing money is available on this blog every month

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• Tips to Manage Holiday Spending–Part 1
• Tips to Manage Holiday Spending–Part 2
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• Managing Holiday Stress
• Resolve to Budget in the New Year
• 5 Fast Financial Fixes to Start 2022
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• 10 steps to financial success: part one
• 10 steps to financial success: part two
• 10 steps to financial success: part three
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