So you had an amazing time with your family and friends over the holidays. Likely there was an abundance of laughter, stories, and great memories. Undoubtedly, there were gifts, delicious food, travelling and unfortunately…holiday debt. While this debt is obviously annoying, it can be paid off in a pretty straightforward way that can be fairly stress free.
The following steps are very easy to follow and can be applied to all types of debt, however we’ll be focusing on holiday debt. As always I encourage feedback and any tricks that you use (which I will undoubtedly share to help others).
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I. Compile Your Total Holiday Debt
The first step and possibly one of the most stressful is to determine how much holiday debt you owe. The hardest part is opening up all the credit card statements and calculating how much you spent. The good news is that it’s not as bad as it seems and it’s all uphill from here. You’ll need to write down these amounts, sum them up and take note on all the applicable interest rates.
II. Minimize Your Interest Rate
Next, we want to minimize your interest charges. Determine which one of your credit products has the lowest interest rate and then move as much holiday debt to it as possible. Typically, you’ll find that lines of credits usually have the lowest interest rate, but many credit cards periodically offer low transfer-in rates. I would recommend that you speak with a trusted representative if you don’t have a low-interest product.
A little insider trick is to transfer these funds to a credit card just before they charge you interest, this way you’ll have about 20 interest-free days.
III. How Much Can You Pay?
The next step is determining how much of your income can be used to pay your holiday expenses. This is where you’ll need to refer to a spending budget and know how much money is left over after your “required” expenses are paid. You can then use this information to determine what you can realistically pay back. The more frequent that you make payments the better. Most people make monthly payments, but quicker payments will reduce interest expenses.
IV. Debt Countdown
Now that you have all this information you can determine how long it will take to pay off your debt. Mathematically, this calculation can be complicated, but there are many free online calculators like that will do all the work for you, for example, http://www.miniwebtool.com/loan-payoff-calculator/. This will allow you to make future plans accordingly and minimize your financial stress.
V. Extra Payments
The final step is to make additional payments when you get a chance. Anything extra will be helpful and this can come from extra income, reducing your expenses, a tax return, or even leftover change.
With these steps you can easily knock down your holiday debt in a predictable manner. Once you determine a monthly payment you can relax and just focus on paying down your debt.
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