Navigating the Aftermath: How to pay off holiday debt.

If you’re feeling the hangover that comes from too much holiday spending, you’re not alone. Estimates say nearly one-third of US consumers spend more than they can comfortably afford during the holiday season, and many of those folks spend the next nine months paying off those debts, only to start the cycle all over again when the leaves have fallen from the trees. Committing to break the cycle, and live within your means is a good start, but you should also be equipped with strategies to pay off holiday debt from the previous year.

To pay off holiday credit card debt, you need a solid plan and a manageable course of action. Here are some tips to get you started.

• Add up two different numbers: your monthly budget for essential costs and the total amount of your debts. Subtract the monthly essential costs from your monthly net income to determine how much you have left over to pay off your debts.
• Add up the total monthly minimum payments on your debts, then sort them by interest rates, penalties, and fees, starting with the highest APRs and fees. You want to pay down the cards with the highest APRs first and avoid damaging your credit rating with penalties or late charges.
• If you have enough income to pay the debt down by making regular payments within a reasonable time, make a budget and stick to it. Do not use those cards until you’ve paid down the balances to zero.

• Balance transfer credit card. Consider taking advantage of a balance transfer offer. Often you can transfer balances to a new card with a low introductory interest rate — or even zero interest — for periods averaging six months to a year for a one-time fee (often around 3% of the amount transferred). In this scenario, transferring $3,000 worth of debt will cost you $90 in fees. That’s a good deal if your current card’s interest rate is in the high teens or twenties. However, if you decide to take advantage of the offer, make a plan to pay the card down completely during the introductory rate. Above everything, do not get caught in the revolving door of switching from one introductory offer to another while making minimum payments.
• Debt consolidation loan. A consolidation loan gives you the opportunity to roll all your debt into one monthly payment from a lender (usually at a rate higher than transfers but lower than your credit cards. This method, responsibly managed, may help maintain and eventually improve your credit score.
• Talk to your lender. Another option is to try to negotiate payment terms or even debt forgiveness with your creditors. They are often willing to work with you to get you on the path to financial success.

Paying off debt is not easy, but sticking to a budget and becoming free of a nagging credit card balance is liberating. Your goal is to manage your debts and budget effectively. If you find yourself struggling, consider seeking debt counseling or help from a financial professional. Finally, remember that while it’s fun to shower your loved ones with nice gifts, it really is the thought that counts.