Yup, the holidays are the time when you can get overboard (in every sense of the word). Who can resist shiny bobbles, Christmas markets and an adorable pair of shoes you’ll wear to a holiday party?
Next thing you know, you’ve swiped your credit card too many times and gone into debt. AKA a debt hangover — when you have trouble sleeping, aversion to checking credit card statements, and even snapping at your loved ones.
It’s not exactly a fun topic, but it’s an important one. Instead of saying bad things about yourself (none of that around here!), grab a cup of hot chocolate, curl up on your couch, and read on to find out what you can do to fix the situation and prevent it from happening again.
What is a Debt Hangover?
Let’s say you go out with a bunch of friends to celebrate the fact you got a fancy new job promotion — you have a new office overlooking the city! You’re so elated you end up buying a round of drink for your friends, then they return the favor. The next morning, you’re a bit sick and wondering what the heck happened last night.
A debt hangover is much like the story above, except that you spent too much money instead of going overboard on drinks. What typically happens is that you’re so caught up in holiday cheer (or another big moment) you go spend-crazy. We’re talking about presents, travel, activities, and food.
It doesn’t stop there. After Christmas shops are notorious for tantalizing deals and sales. Besides, if you received gift cards, you may spend more than the amount on the gift card. New Year’s resolutions can also make you swipe that card more than you should. Like declaring you’ll implement an exercise routine, so you buy new outfits or a yoga mat. Or you’ll eat healthier, so you go and buy a blender to make smoothies.
Come January, your financial ends up suffering. The credit card bills reveal the consequences of your actions, and it may not be pretty.
But you’re not alone. Statistics from the Federal Reserve in October this year show that credit card debt went up over 10%, the highest in 16 years.
No Shame in This Game
If you’re in debt, there is no shame around it. It’s understandable you got caught up in the moment. There’s something about holiday displays, delicious food, and Lifetime holiday movies that can turn anyone into a credit card swiping monster.
The important thing is how you deal with the situation. Allow yourself to feel whatever it is you need to feel, then start working on an action plan. If you got yourself into some hot water with your money, there is a solution to get yourself out of it. The first step is to recognize you have debt and refusing to ignore it.
How to Cure Your Debt Hangover
No matter how much holiday-related debt you picked up, acknowledge how much debt and make a plan. As in, tally up all your credit card statements and see how much you owe. It’s OK, take a breath if you’re shocked by the number.
Now you’re ready to take some action:
Start Paying Your Credit Cards
It’s pretty obvious you should pay down your debt (duh!). It’s important to remember that you need to make at least the minimum payments on those credit bills, more if you can. Paying the minimum payments gets you out of trouble with your creditors and paying more will get you out of debt faster.
It’s also a good idea to figure out a debt-free date. The beginning of the year is also a pretty lucky time — you may get year-end bonuses, cash gifts, and tax refunds. (We’re not telling what to do, but you may want to take the extra cash to tackle your holiday debt!)
We get it. Debt can be overwhelming. Instead of doing it by yourself, see if you can seek support — friends or personal finance tools — that can offer you suggestions to cut out unnecessary costs. Your budget may have seen better days, but now’s the time to see where you may be able to cut back to help pay off that debt.
Think of simple actions you can do like canceling subscriptions you never use or negotiating down bills. You’d be surprised at how a simple 15-minute call can save you hundreds of dollars. (Or, Charlie can do it for you!)
Take on a Side Hustle
If you don’t have enough money to pay down your debt, consider taking on a side job to earn more… There are lots of options — think grocery delivery services to mystery shopping gigs — all you have to do is find one that works around your schedule.
How to Prevent Future Debt Hangovers
As the saying goes: an ounce of prevention is worth a pound of cure. Take it as a lesson learned in that it pays to be prepared. It’s never too early to open a savings account to start your holiday spending fund for the upcoming year. And oh yeah, set a budget!
And when you do, make sure to take as much as you can into consideration. Think gifts, wrapping paper, and transportation costs — everything adds up!
It’s not sexy to think about preventing debt, but your future self will thank you when you leave the holiday unscathed and hangover-free.
– Sarah Li Cain, hicharlie.com