Spent Too Much on the Holidays? Here’s How to Manage a Debt Hangover

Are you experiencing the dreaded holiday spending hangover? While 2023 was financially challenging for many Americans, nearly nine in 10 still planned to shop for the holidays, according to a November 2023 Gallup poll.If you’re feeling the post-holiday pinch in your wallet, here’s a closer look at the recent holiday spending trends – and six ways to recover from overspending. While it’s not uncommon for Americans to overspend during the holidays, many were in a tough financial place in 2023. “This year, part of the reason was inflation, with rising prices remaining a challenge for household budgets,” the co-CEO and co-founder of Achieve, Andrew Housser, said in an email. Further, 60% of consumers went into the season living paycheck to paycheck, according to a November 2023 PYMNTS survey. Without discretionary income to cover the holiday magic, 43% of Americans who were struggling to pay bills planned to use credit, and 37% of all consumers planned to use their savings.Gallup’s survey found that 88% of Americans planned to spend an average of $975 on Christmas and holiday gifts, up from $867 in 2022.”Millions of Americans are living paycheck to paycheck and just didn’t have the extra money to pay for holiday purchases,” Andrea Woroch, consumer and money-saving expert, said in an email, “They also weren’t willing to sacrifice the season for their family and kids, so they took on debt to make it magical.” If you went over your holiday budget, here are six steps you can take to get back on track: Start by reviewing your budget and holiday spending. Figure out how much you spent over the holidays and how it’s impacting your overall financial picture. Did your savings take a hit? How much? Did you take on new debt? How much and how long will it take you to pay it off? “Figure out how much you owe on each account and list out the interest rate for each,” Woroch said.Next comes damage control. “Once you know how much you owe, set a debt repayment plan by identifying how much you can afford to pay toward your debt each month. Being realistic is important so you don’t burn yourself out,” Woroch said. If you overspent by $1,000, for example, perhaps that means putting $200 back into savings each month for five months. “Many people resist doing a budget because they think it’s meant to restrict spending. It’s not. It’s intended to serve as a tool that helps guide your spending so that you can achieve what you really want in life,” Housser said. He suggested tying your debt repayment plan to the reasons they are in place, like retiring by a certain age or taking a vacation. If you have multiple balances, consider debt consolidation. You may be able to consolidate multiple types of credit accounts with a personal loan, or multiple credit cards with a balance transfer card. “A balance transfer card is a great tool to help you pay off your holiday debt fast. Zero percent balance transfer cards can give you up to 21 months to pay off debt without additional interest piling up so your entire payment goes towards reducing your balance,” Woroch said. She explains that card providers charge a balance transfer fee of 3% to 5% but it’s often cheaper than what you’ll spend on interest. You often need good or excellent credit to qualify for a balance transfer card, however.If you’re finding yourself short on money, consider going on a no-spend diet where you don’t spend money on anything beyond the essentials for a specific period (like a week or month). “Just like it’s advised by a health professional to go on a diet when you want to lose weight, you need to trim excessive spending if you want to shed debt,” Woroch said, “You’ll save much more during this period and that extra cash can help you pay down your balances faster.”Along with cutting spending on nonnecessities, look into reducing your bills.”Assess your bills and figure out where you can make changes like cutting unnecessary add-ons on your primary services (like cable), canceling unused subscriptions, reducing your mobile data plan and increasing your insurance deductible,” Woroch said. She also recommended services like Billshark and Bill Cutters that negotiate your bills for you. Another option is to look for ways to increase your income, like picking up extra hours at work or doing work on the side. Possible side gigs include becoming a virtual tutor, delivery driver, pet sitter, writer or handyperson. “Taking on a side hustle is a great way to boost your debt payments. Keep in mind, it isn’t something you have to do forever. Maybe you commit to just one month, or three, until you rid yourself of all your unwanted debt,” Worch said. Looking to avoid holiday debt in the upcoming year? Here are three preventative steps you can take. Talk about holiday spending with family and friends early. Everyone may feel obligated to give gifts, so perhaps you could do something creative instead. For example, a group can do a white elephant gift exchange for the adults and individual gifts for the kids. You may also want to plan a potluck instead of cooking an entire holiday meal yourself. “If you really want to cut back on some holiday expenses, it’s unrealistic to do so at a moment’s notice next November. Talk with family members and friends now, or in the coming months about what you hope to do for the season. Ask for their ideas and input,” Housser said. It can also help you figure out what expenses were most worth it in past years. “Reflecting on how you and your family and kids felt and what was most important is another way to rid yourself of wasteful spending,” Woroch said. It can be easy to get swept up in the emotions and pressures of the holidays. If you’d like help navigating it all, consider consulting a financial therapist. “Financial therapists can help you find the balance between money matters and mental health, ways to tackle anxiety related to money, strategies for saving toward your goals and more,” Erika Rasure, chief financial wellness advisor and financial therapist at Beyond Finance, said in an email. Work out your Christmas budget now and examine the most recent holiday season. Include the costs for special meals, hosting, traveling, outfits, gifts, decor and anything else you typically buy. Divide it by 12 and add it to your monthly budget. You can buy items throughout the year or stash away the necessary amount of cash. “If you put away just $50 per month or $25 every other week, you will have $600 saved by December to help cover most of your purchases,” Woroch said.

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