Learn and Plan | Dealing with holiday debt
A man reviews his finances after the holidays

Dealing with holiday debt

Jan 8, 2024, 7:48:49 PM | Reading Time: 4 minutes

After the holidays, many people start the New Year trying to regain their financial footing by paying off credit cards and setting resolutions that include healthy money habits. Recovering from holiday debt can be challenging, especially if your spending went over budget and you’re trying to pay down a balance on top of everyday expenses. Here are several tips for tackling holiday debt, improving financial wellness, and being better prepared for the next holiday season.

Follow a payoff planFollow a payoff plan

For those who roll into January with credit card debt, it’s essential to create a plan that allows the balance to get paid down as quickly as possible. Otherwise, the interest that accrues each month could make eliminating debt a longer process. Whether there is one credit card or multiple, creating a payoff strategy for each that fits into your budget can make paying off holiday debt more successful. After listing the debts and the amounts that need to be paid, there are different approaches to reaching a zero balance, including:

Snowball method

With this strategy, the minimum payments on each account from highest balance to lowest are made each month. On the account with the smallest balance, the highest payments possible are made to decrease the amount due more quickly. Once this is paid off, you focus on the second smallest balance and work to pay it off while still paying the minimum payments on all other accounts. By carrying over the amount to the next balance, soon, all accounts will be paid in full.

Avalanche method

In contrast to the snowball method, the avalanche method pays down balances with the highest balances and interest rates first.

More financial tips for the New YearMore financial tips for the New Year

In addition to paying off holiday debt, many people wish to adopt new financial habits as they head into a new year. Gaining positive money skills can help put you on the right path toward achieving your financial goals and being prepared if emergencies or unexpected expenses arise.

Start a budgetStart a budget

Designing a solid budget is an excellent first step to creating a robust financial plan. Finding a method that works for you is key to sticking to a budget and keeping financial goals on track. Whether you like making lists, keeping a spreadsheet or prefer technology that can help track income and expenses, understanding how your money is spent can be very valuable. As you become better informed and gain money management skills, making changes that align with your savings goals becomes more manageable.

Develop a savings planDevelop a savings plan

Life can be full of unexpected events, so many experts agree that having an emergency fund equal to 3 to 6 months of salary can make a huge difference in financial preparedness. If that number is not feasible, it’s ok to start small. A budget can help determine where money is being spent and where there are opportunities to put more toward savings goals. If there are areas where you spot overspending, you can strategize how to reduce those expenses and potentially free up funds that can go into savings.

Consider investingConsider investing

For those who wish to work toward savings goals like putting more money away for retirement, creating a comprehensive financial plan can help turn those dreams into reality. With a diversified financial strategy, there can be opportunities to explore investments that match personal goals and risk tolerance. Certain investments can be riskier than others, but may offer a higher potential for growth. A financial professional can help explain each option, the risks involved, and how to set a plan that works for you.

Grow financial knowledgeGrow financial knowledge

Optimizing money knowledge is essential to be an effective planner who makes confident financial decisions. Plenty of online tools, podcasts, and resources are designed to help you budget, plan, and save for the future. Partnering with a financial professional can also offer expert guidance and explanations of different financial concepts and solutions that can be useful on your financial journey.

Create a holiday spending plan

A proactive approach to preparing for holiday spending can help prevent unnecessary financial stress and carry debt into the following year. Using a budget to set spending limits for the holidays and then carving out the amount needed to cover these costs can help keep expenses under control. Strategies for planning for holiday spending include:

  •  Revisiting how much was spent on holiday-related expenses last year
  •  Automatically depositing money into a holiday savings account monthly
  •  Creating a detailed list of holiday expenses with the total amount needed
  •  Shopping throughout the year to break up costs and avoid last-minute buying

Making a holiday budget early in the season can lead to a stronger financial position later in the year while helping prevent added debt and financial worry—freeing you up to enjoy all the festivities that time of year can bring.


The term financial professional is not intended to imply engagement in an advisory business in which compensation is not related to sales. Financial professionals that are insurance licensed will be paid a commission on the sale of an insurance product.