Christmas and debt: 6 tips to quickly pay down holiday debt

The holidays come and go in a blur. But as you fall back into your day-to-day routine, reality may be a bit sobering. Jingle bells are now jumbo bills. A look at your credit card balance feels like finding coal in your stocking. The red and green decorations are packed away—but you’re still in the red. So what can you do?

Here are six ways to dash away holiday debt so you can move on to prosperity in the New Year.

Buyer’s remorse or feelings of guilt can hold you back from making progress. Instead, tackle that debt head-on by knowing where you stand and making an action plan. Take inventory of your holiday expenses—noting the balances and interest rates on each card or loan. Then set SMART (specific, measurable, achievable, relevant and time-bound) goals for paying them off. For example, you may commit to paying off the holiday purchases on your credit card with the highest APR by spring.

“When the holidays are over, it’s time to buckle down,” says Karl Jensen, financial planner in Advice & Planning Services at Thrivent. “Don’t have regrets. You had your ‘let loose’ moment. Now it’s time to get back on track with our good habits.”

Breaking down your larger goals and setting clear objectives will help you stay motivated. Focus on the financial freedom you’ll be able to enjoy once that debt is paid off and you can again be more flexible with your resources. Will you be able to put away more money for retirement? Finally save up a down payment for your dream home? Get yourself in a better position to give to your favorite causes? The choice is yours.

You’re not alone. Americans went into debt an average of $1,028 during the 2023 holiday season. And 28% of those who shopped with credit cards are still paying that off. Needless to say, going into Christmas debt is a common pitfall that trips up many families year after year. But you can break the cycle.

While credit cards may have enabled you to rack up debt by overspending, they also can be tools to help you get out. Look for promotions on new cards that may be offering 0% APR or longer grace periods. You may be able to transfer the balance of your other card(s) if you can commit to paying it down. Just be aware of how opening a new account may affect your credit score. And that failing to pay off a transferred balance before the end of an introductory period can sometimes result in a higher interest rate on the remainder—potentially delaying (or deepening) the problem.

As you work on whittling down your credit card balance, try to use cash or readily available funds in your checking account to avoid adding to that debt. That way, you’ll only be able to spend money that you actually have. Look at your budget for discretionary spending you can temporarily reduce—such as dining out, entertainment or subscriptions. Even small sacrifices, like cutting back on takeout, can add up and make a meaningful difference in paying down your debt. You even may consider using the envelope budget system to set aside cash each month for specific spending categories, like groceries, gas and food. Once an envelope is empty, you’ve completed your spending for that particular purpose.

Budget better in every season

‘Sleigh’ debt with the help of a 1:1 money coach. Money Canvas^®, a free virtual coaching program from Thrivent, can help you dial in your spending and find the right budgeting style to help you achieve financial success year-round.

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The earlier part of the year may bring about windfalls that can help you pay off debt quickly. For example, might you get paid out an end-of-year bonus? Were there some changes to your tax eligibility (think filing status, tax bracket, income, credits and deductions) that may result in a higher refund come spring? What about a monetary gift or inheritance you’ve recently received? Commit those larger lump sums toward getting rid of debt for good.

Don’t make credit card debt an annual Christmas tradition. Try to spread out gift- and decoration-buying throughout the year, especially when there are sales, to prevent an end-of-year spending crunch and skip holiday price mark-ups.

Start early and buy one gift a week, or a month. “But remember to write down what you’ve purchased,” reminds Julianne Allen, a coach with Thrivent’s Money Canvas^® program. “Sometimes you forget what you bought in October and then think you have to crazily go out and shop in December.”

You also can create your gift-giving list early. Make sure your list includes who you’re buying for along with what you’re buying. Set price alerts to help you decide the right time to buy as sales and deals cycle through over the next several months. And remember: If it’s not on the list, it doesn’t go in the cart.

You may think of Santa Claus as your seasonal sidekick, but working closely with a financial advisor in the New Year may be able to help you financially recover from the holiday ho-hums more quickly. They can offer expert guidance and comprehensive tools to help you pinpoint financial mistakes that may be holding you back. They also can give suggestions to help build up your buffer to ensure future holiday spending won’t dull your Christmas spirit.