A 4-Step Holiday Debt Management Guide

Is there a time of year more dangerous to our financial health than the holidays? One could argue that no, there isn’t.

As a self-proclaimed “debt ninja,” below is a quick 4-step guide on how to get through the holidays without wrecking your credit or (worse) taking on even more debt that you’ll have to pay off in the new year.

Step #1: Spend as little as possible on holiday gifts

In order to keep your finances under control during the holiday season, especially if you have debt, it is imperative to spend as little as possible on gifts. The first step to combatting holiday overspending is to take a look at your budget and tally up how much you have to spend on gifts this year.

If it isn’t much, or you’d rather allocate the money to your debt, there are many creative ways to keep costs low.

• Consult with family and suggest a no-gift Christmas or a Secret Santa exchange rather than buying individual gifts for an entire group.
• Donate a set amount to charity. Bonus points if you pick something important to your heart or that impacts your family (e.g. a donation to breast cancer research in honor of your Aunt who is a survivor). Let loved ones know this was your holiday contribution on their behalf this year, either in a card, via a cheerful email announcement or Facebook post (and tag them of course!).
• Get creative with your gift giving: homemade food items, DIY crafts, or trial beauty size items all make thoughtful gifts.
• Stack your spending at just a handful of stores in order to optimize holiday savings and discounts.
• Take any credit card cash back rewards earned throughout the year and use this to fully fund your holiday spending, so you don’t have to take money from your monthly budget.

If anyone seems to take issue, let them know this moratorium on gifts is just for this year while you get your finances in order. Often, just speaking up and letting your wishes be known is all it takes to get friends and family on board with your financial goals.

Step #2: Pay with debit or cash (where possible)

Setting a budget for the holidays is one thing. Sticking to it is quite another. This is why it’s best to pay for gifts (or travel, or booze for holiday parties) in cash or with your debit card.

Cut up your cards or put them in the freezer for the month of December – a la Isla Fisher in “Confessions of a Shopaholic.” Go to the bank and take out cash. Buy the purchases in-store rather than online.

All of these are decidedly “old school” debt management methods, but in a digital world where it’s so easy to overspend, they really do work. Most importantly, these money moves reinforce the visceral feeling of parting with your hard earned money. Research shows people really do spend less when they use cash.

Step #3: Take advantage of your holiday gifts to make real debt progress

If friends and family are asking what to get you this year, let them know you’d like cash instead of material items. While this may feel awkward, let them know you’re focusing on your finances and would really like to start making progress on paying off your student loans/credit card/car loan.

The way this conversation works without being completely pushy, tacky, or awkward is to tell the loved ones the why behind why you’re paying off debt. You could say, “I’m trying to pay off my car loan so I can save more to buy my first house,” or “I’d like to pay off my student loans so I can put away more for retirement.” These are not only noble goals anyone would be happy to support, but your friends and family will feel included in making your financial future brighter.

For family members who may feel weird handing over cash or a check, platforms like Tendr allow individuals to register an occasion and accept cash gifts online.

Step #4: Get a plan together for aggressive debt payoff come January 1st!

The biggest component of managing your debt during the holidays is not going into any additional debt. With that said, making true progress during the month of December can be a challenge. Don’t beat yourself up in you’re not able to chunk away lots of cash.

Instead, give yourself the December challenge of just paying for gifts in cash and not taking on additional debt. Then, use any extra holiday time to create a full debt payoff plan for the entire year.

This way you’ll be ready to swing for the fences once the holiday season is over.

Last year, American holiday spending increased by 4% over the year before, and analysts are projecting even more spending this year. With the average household spending over $900 on the holiday season, don’t make your financial situation even worse by going deeper into debt at the holidays.

Remember: you don’t have to spend like the Joneses to enjoy the best of the season.

This blog post does not constitute, and should not be considered a substitute for legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.