Did you accrue a bit of debt over the holidays? Whether it be for gift-giving, event planning, or traveling, the holidays can be expensive and can put us a bit behind financially. Don’t worry – you’re not alone, and there are several steps you can take to repay holiday debt and get back on track. Depending on the size of your debt, this may require minimal action, or it could entail significant lifestyle changes. Either way, managing your debt is important to avoid damage to your credit score and building more debt in the future that is harder to come back from.
Evaluate Your Debt Repayment Strategy
If you are unable to pay all your bills immediately or by their scheduled due date, it’s time to put a plan into action. First, put your top priorities first, such as rent or mortgage payments, food, utilities, gas, and other critical living expenses. Then, evaluate the interest rates on each of the debts you owe to determine which should be paid first. There are two common schools of thought when it comes to repaying debt, which are:
- The avalanche method — Make minimum payments on all your debts, and anything leftover should be put toward paying off your highest interest debts.
- The snowball method — Put extra money toward your smallest balances to eliminate them more quickly, then move on to the next smallest balances so you can shorten your list of debts as you go.
The best way to go about this is to list your debts by amount, how much each charge in interest, and compare that to how much you are able to allocate toward those debts. From there, create a payment schedule that you can refer to and keep track of payment dates.
Find Ways to Access More Cash
Simply saying “get more money” isn’t actionable and can be frustrating when it doesn’t seem so easy to do so, especially with rising interest rates and inflation. However, there may be a couple of ways you can secure a bit more cash to put toward your debt payments.
For example, there may be furniture, appliances, and other possessions of value collecting dust in your home that you can resell.
Additionally, you may consider a side gig such as Uber, DoorDash, or Instacart. These temporary freelance jobs can offer you some extra cash while you work toward paying down your debts. There are also options for work such as babysitting on Care.com or finding pet sitting/walking jobs on multiple apps like Rover or Wag.
Consider Debt Consolidation
This may be a perfect option for some but not for others, so consider it in detail before proceeding. If you have multiple high-interest debts, you can apply for a loan that combines your current debts into one and offers a lower fixed interest rate for that total. Keep in mind, you’ll likely need good to excellent credit to secure a debt consolidation loan.
Although it’s only the beginning of the year and you’re still working on catching up on this most recent holiday season, keep in mind that once you’re feeling more financially stable, get ahead of next year’s holiday expenses wherever you can. Spreading out holiday spending throughout the year will help significantly in avoiding another overspend next time around.
If you need help with information about loans, budgeting, and debt repayment options, reach out to us at Republic Bank by calling 800-526-9127 and visit our resource library for more financial planning tips.