Working Off Your Holiday Debt Overhang

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Holidays, gift ideas, giving gifts, regifting, Christmas, debt payoff, debt reduction, holiday debt

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The following is a post by MPFJ staff writer, Kevin Mercadante, who is professional personal finance blogger, and the owner of his own personal finance blog, He has backgrounds in both accounting and the mortgage industry.

The holiday season ended just a few weeks ago, but if you are like most people, the memory still lingers on – and you have the credit card bills to prove it. The holiday season, and in particular Christmas, can create large expenses that just beg for at least an occasional swipe of plastic.

By now, the bills are in and you’re in an excellent position to fully assess the holiday damage. If you spent a little too much and ran your credit cards up higher than you’re comfortable with, now is the time to do something about it.

The risk of letting your debt roll into next year

Big debts always start out as small ones, and the small ones often originate at the holidays. It’s easy to do – the holidays can leave you inundated with expenses. Not only are there gifts to buy, but there are also decorations, special dinners to plan and prepare, extra restaurant meals and, very often, holiday related travel. The cost for all this can run well into the thousands, and it can be a real cash flow killer. Credit cards can seem like the logical solution.

Using credit cards to deal with a rash of unusual expenses isn’t bad advice in of itself. Where the problem comes is when those debts are just rolled forward, rather than immediately paid off. Once you get comfortable with even a small level of debt, larger levels are more than possible.

Perhaps the best way to use credit cards responsibly is to get into the habit of paying them off immediately. The last thing you want to do is to face next holiday season while still carrying debt from the last one. You can take care of that problem by paying those debts off now.

Time to go on a spending diet

If you spent too much money during the holiday season, you can balance that out by cutting back on your spending now. One of the advantages to doing that early in the year is that there are no major holidays, nor is this a traditional time of the year for travel and vacations. The lower expenses should enable you to direct extra cash flow into debt payoff.

You may even consider using the early part of the year as good time to go on a spending diet. Good financial habits are best established early in the year, that way you can carry them forward through the rest of the year. Seize the opportunity in this the quietest time of the year to cut back on any unnecessary spending, and free up money for other purposes.

Fast forward debt payoff

If you can find or create extra room in your budget, do your best to direct it into payoff of your holiday related debts, and any other debts that you’re carrying. This is an excellent time of the year to clear the decks for other money moves.

Paying off debt is always a worthy effort because the elimination of any debt will also remove a monthly payment from your budget. The more of those you can clear out, the more money you will have for everything else that you want to do.

At a minimum, you should want to payoff your holiday related debts so that they are not still hanging around when the new holiday season comes.

Start savings for next holiday season

Here’s a novel idea: instead of relying on credit cards next holiday season, plan now for cash on the barrel. You can do that by paying off your current debts, and then once you do, to begin saving money for next season.

Banks used to offer “Christmas club accounts” specifically for this purpose, and many employers would allow you to direct deposit money into such an account. While those accounts are probably still out there at certain banks, they don’t get the publicity they once did. Perhaps this is because customers are more interested in chasing yield on their savings, rather than on keeping their money safe for a dedicated purpose.

But you don’t need a special account, you can establish your own Christmas club account in any way that works for you. This could be a matter of setting up a dedicated savings account at a local bank, or even quite literally putting cash in a cookie jar each week. Whatever allows you to accumulate the amount of money you will need for the holidays will work.

The payoff is that when next holiday season comes, not only will you not have last year’s debt, but you’ll also have a reserve of cash that will make facing the holidays so much more pleasant. You will be able to buy what you need, when you need it, without having to worry about carrying fresh debt into the new year.
Now is the time to make that happen!

How about you all? Do you make it a habit to save money specifically for the holidays?
Share your experiences by commenting below!

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    1. Jacob, these are all great points, however I find that having a “holiday” bank account and funding it throughout the year is the best way NOT to suffer a post-holiday financial hangover. My January credit card debt used to annoy me, so I decided to become a little smarter and save for the holidays.
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