Debt tied with a bowThe holiday season often inspires us all to be a little more generous with our time and our treasures.  If your generosity resulted in some credit card debt that you have now carried into the New Year, you are not alone.  It’s not a crime to focus on the joy of giving, but we must also create a game plan to ensure our gifts do not become financially overbearing in the months to come.  Here are some Dos and Donts to take control of your finances and to successfully rebound from holiday debt:

DO
1. Make a list of the credit cards used during the holiday season and set a deadline to pay off these bills. Be aggressive and aim to have everything paid off by March 31, 2015.

IOUs santa2. Pay more than the minimum balance on the credit card(s). The more you pay, the faster these balances will go away.

3. Use funds from your savings account to pay off these debts. The credit card interest rate is most likely higher than the interest rate your money earns sitting in your savings account, so it makes more sense to reduce your debt first.

4. Negotiate a lower interest rate with your credit card company. Every little bit helps, so ask for a lower interest rate to pay this debt off sooner.

DON’T
1. Wait for miracle money (e.g., gambling gains, anticipated bonuses, etc.) to begin paying off holiday debt. These sources are not guaranteed, so plan to tackle debt repayment based on your current income sources.

2. Take out a 401(k) loan to payoff your debt. Avoid borrowing from retirement accounts at all costs! Doing so will reduce your eventual retirement and may force you to work longer. holiday-debt

3. Open a home equity line of credit to payoff your debt. Instead of paying off the debt, you are simply transferring the debt to an asset – your home.

4. Apply for a payday loan. Payday loans prey on low-income borrowers who are strapped for cash. These loans are never a good idea based on the extremely high fees charged by the lenders.

Need More?

Need more inspiration to overcome holiday spending woes? Check out How To Recover From a Financial Hangover for more great ideas.

We want to hear from you.  Did you incur holiday debt?  If so, how do you plan to repay the debt in 2015?