Despite the best of intentions, many of us spend more than we planned for the holidays. (And maybe ate more than planned, too!) But as I’m fond of saying, there’s always an answer and a path forward. It’s time to get those high-interest balances down and the debt back to minimal numbers. Here’s a 5-step post-holiday debt recovery plan that’ll help you take charge of your finances and work toward a debt-free life in 2024.
Step 1: Uncover Your Debt Reality
The first step is understanding the scope of your debt, including debt you’ve accumulated during the holiday season. Gather all relevant bills—those credit card statements, store accounts, and personal loans. Make a list of the total amount owed and the interest rates for each debt.
Step 2: Craft a Feasible Budget
Your financial journey begins with a well-crafted budget. Take a detailed look at your monthly income and expenses. (I like to use Excel to do the math for me!) Be thorough when categorizing your spending, and identify areas where you can make temporary adjustments to allocate more funds toward debt repayment.
Step 3: Prioritize Your Debts
Debts come in various shapes and sizes. To regain control, prioritize them. You save the most by starting with the debts carrying the highest interest rates and working your way down. Focus your efforts on tackling high-interest debts, like credit card balances or cash advance loans. If you are more motivated by achieving quick wins, the debt snowball method might be a better fit for you. The debt snowball method involves paying off the debts with smallest balance first to build momentum and motivation for tackling larger ones.
Step 4: Embrace Lifestyle Adjustments
Small but meaningful lifestyle changes can accelerate your debt recovery. Choose one budget-friendly adjustment, like packing lunches more frequently or reducing dining out. Unsubscribe from underused subscriptions, occasionally handle lawn and snow services yourself, and compare car insurance rates to uncover potential savings. Remember, even modest changes, like saving $20-$50, can accumulate and halt the long-term impact of compound interest.
Step 5: Boost Your Speed
Think outside the box to enhance your income and one-time funds. Consider taking on freelance work, part-time positions, or gig work. Consider consigning or selling items you no longer need—this not only provides extra cash but also declutters your space. If doing this during the post-holiday season isn’t an option, mentally set aside a majority of your 2023 tax return to pay off the debt and start saving for the 2024 holiday festivities early.
Lastly, think about seeking assistance from a nonprofit agency, like Apprisen, that can assist you in securing lower interest rates and more affordable monthly payments through a debt management plan. We collaborate with your creditors to devise a workable repayment strategy for many types of debt.
Remember, Your financial health matters, and with determination and practical steps, you’ll be on the path to a debt-free, financially empowered new year.