01.11.2010 / How to Dig Yourself Out of Holiday Debt

Tip #1 - Create a Debt "Snowball"

Make a list of all your credit card accounts and determine the order in which you will pay them off. Whether you choose to pay off your account in the order of the lowest balance to the highest or the highest interest rate to the lowest, pick one and stick with the plan. By focusing on one balance at a time, you will benefit greatly as you see the balance reduced and paid off. Generally, it is recommended that you should pay off balances with higher interest rates first.

Tip #2 - Pay More than the Minimum Payment

Paying more than the minimum amount due will accelerate the speed at which you pay off your balance. You can also send more than one payment throughout the billing cycle. Consider making your payments online to eliminate the cost of checks and postage.

Tip #3 - Increase Your Cash Flow

If needed, work overtime at your current job or find a second job. If you don’t have time to work more hours consider increasing your income by selling unwanted items on auction sites. Have a yard sale and put any proceeds directly toward your debt. Similarly, if you receive a pay increase at your job, don't spend the extra money, put it towards your holiday debt until it is paid off. Just as you can "trim the fat" by selling stuff you don't need, find ways to reduce or eliminate expenses and put the extra toward debt – eliminate extras from your cell phone bill, get rid of the fancy cable, purchase generic vs. name brands, cut out the gourmet coffee, and take your lunch to work instead of eating out.

Tip #4 - Start a Budget

Knowing exactly how much money you bring in each month and how much is needed to cover your bills is the best way to understand how much money is left over to spend, save or apply towards your holiday debt balances. Create your budget and stick with it.

Do you have any debt reduction tips that have helped you? We want to hear from you!