How are you feeling now that 2020 has officially arrived? Is your head pounding, anxieties firing, and pulse quickening? If so, then you might have a hangover, and no — we’re not talking about the one that you may have woken up with on January 1. We’re talking about a financial hangover — that is, you spent more than you could afford during the 2019 holiday season and are now forced to face the true reality of it.
And the numbers as a whole… they aren’t pretty. According to data from Mastercard, the 2019 holiday shopping season was the best in years, with retail sales up nearly 3.5 percent and online sales up nearly 20 percent from previous years. Per MagnifyMoney, that equates to about $1,325 in holiday debt that Americans are now going to be managing for the coming weeks, months or, in some cases, even years.
In fact, MagnifyMoney’s annual post-holiday season debt survey discovered that while nearly 60 percent of consumers plan to pay off debt within three months, a surprising 16 percent stated they plan to pay it off in more than five months, and 15 percent only plan to make monthly minimum payments on holiday debt they’ve accrued. The longer you delay paying off debt, the more you’ll pay long-term when you consider interest rates.
Need to drink some water or pop some Motrin yet? Don’t hit the panic button yet if you’re among the percentage of consumers looking at more of a long-term debt payment strategy, we’ve got the tips here to get you into the group that will be able to pay off debt in the near-term. Here’s a look:
- Take January off: No, not from work — from “play.” If you splurged on spending during the holiday season, chances are you weren’t shy about dining out either. Take January off from eating out, stream a movie at home instead of going to the theater, and skip the bar to save more money to put toward your debt repayment.
- Cash or debit only: Use cash or your debit card as your sole payment method until you can pay off your holiday spending debt. Do this for two reasons. One, refraining from using your credit card prevents you from adding to your revolving debt. And two, paying via these methods ensures you’re only spending money you already have and staying within your means.
- Out with the old: Use January to take inventory of your home and get rid of any items, products or clothing that you no longer use or need. If they’re in good condition and of value, explore selling them on avenues like Facebook Marketplace and putting any money toward your debt. One item might not seem like much, but several that you’re able to sell can add up.
- Reassess your expenditures: Are there streaming services you pay for but don’t use? Can you downgrade the data plan on your mobile phone to save money on the monthly bill? Does cutting cable make sense? Are you paying too much for car insurance? Have a gym membership that you never use? There are several things you can do at little to no inconvenience to your well-being or quality of life that can help save money that can be used for eliminating debt.
- Use tax time to your advantage: It’s common for Americans to use their income tax refunds to splurge on vacations, big purchases or other life luxuries — even if they have credit card debt. This year, if you haven’t already paid off your holiday debt, we suggest using your refund to pay off the remaining balance. And if you have already paid off your 2019 holiday debt, then use the refund to establish a savings account for 2020 holiday spending so you’re not in the same situation a year from now.
Feeling better about your debt management plan? Even just following through on one of the aforementioned tips can put you back on the path to financial sustainability. Get out there and kick that financial hangover today!