The holidays — as heartwarming as they are — can be a time of stress for Americans. In addition to the hustle of making travel plans and dinner menus, participating in the holiday cheer usually involves spending money. A survey conducted by MagnifyMoney found that 31% of Americans took on debt to pay for gifts, travel, and entertainment for the holidays in 2020. Those who took on holiday debt borrowed $1,381 on average, up from $986 five years prior.

But a variety of strategies can help you pay down your holiday expenses.


If You Accrue Holiday Debt, Here Are 3 Tactics You Can Use 

1. Use a debt pay-off method

Avalanche method: This method involves making the minimum payments on all your credit cards and any other outstanding accounts. Once you've made all the minimum payments, you can use the rest of the money you've allotted for repaying debts to the debt with the highest interest rate. By using the avalanche method, you can reduce the total amount of interest you'll pay and ultimately make progress on paying off all your bills.

Snowball method: With the snowball method, you pay off your smallest debt first, then your second-smallest debt and so on until you work your way down the line. You'll still make minimum payments on all of your bills, but you will spend the extra money you have set aside for each month on additional payments toward your current smallest debt. This method may involve paying higher total interest in the long run, but seeing debts get paid off can help build momentum and keep you motivated toward becoming debt free.


2. Take out a personal loan

Otherwise known as a debt consolidation loan, you may be able to take out a personal loan to pay off holiday expenses. In this method, the loan goes toward paying off your credit card debt. Then, you'll make payments toward your personal loan to pay that off as well. Taking out a personal loan might also provide you with more payment flexibility, however as with all debt, it’s important not to miss or make late payments as that can negatively impact your credit score.

While debt consolidation can be a good option, there are some things to consider.  To minimize risks, always look closely at any fees and requirements before you apply.  Also be aware that it could impact on your credit score.  A new credit application and a change in your credit utilization ratio can both negatively impact your credit score.  Finally, you will also want to plan on adjusting you spending habits.  You want to avoid incurring new debt for the debt you are paying off.   


3. Pick up a side hustle

To help pay off your debt faster, you might consider taking up a side hustle to bring in some extra income. Job sites like LinkedIn can show you which companies are looking for part-time employees, or you can take up a gig such as delivery driving. No matter what your work schedule is, there are bound to be some opportunities you can take to earn extra money to pay off holiday season expenses. You can even use paid time off or paid holidays from your full-time job to partake in your side hustle. One thing to keep in mind is that your employer might have certain restrictions when it comes to an employee performing outside work. Be sure to consult the employee handbook before you use a day off to earn extra money elsewhere.


How to Prevent Overspending During Holiday Time

If you've already racked up debt, that's okay! You can tackle repayment in installments. At the same time, you can avoid accruing more holiday debt in the future through financial planning.


Create a budget and stick to it

Think about how much you spent on holidays last year. Whatever that total is, you should consider how much you would need to save throughout the year to avoid overspending next holiday season. You might consider putting any bonus holiday pay directly toward your holiday expenses such as gifts and travel. You may also consider working on days when you can earn time-and-a-half or double-time pay.

You should also think about the way you spend during other holidays outside of Christmas and New Year's Day. For example, do you always plan one last summer getaway for Labor Day weekend? Do you host a cookout on Independence Day? Rather than going home for Memorial Day weekend, can you visit your family when flights may be cheaper? Smaller celebrations add up too, so be sure to factor them into your budget.


Use a holiday fund

Once you know how much money you need for the holidays, consider setting goals for yourself. If you save up, can you afford to pay all of your holiday expenses without incurring debt? Having a holiday fund means you will have a dedicated pool of money to spend at the end of the year. Some people like to use all of their earnings from side gigs and additional hours worked as their holiday fund. Others prefer to save a certain amount of income each month to put toward expenses. Whatever you decide, resist the temptation to touch the funds you have set aside.


Reduce your spending

It might not hurt to spend some time reevaluating how much you're spending over the holidays. If you tend to buy expensive gifts for your loved ones, consider decreasing your gift budget or offering homemade gifts or experiences as an alternative. If you’re inclined to host big get-togethers or go on lavish getaways, you can also consider hosting more intimate parties and staying closer to home to reduce spending.

Whether you're recovering from the last holiday season or planning for the upcoming year, these tips can help you pay off holiday debt and avoid overspending. Just remember, every person's situation is different, so find what works for you.


This content provided is for educational and informational purposes only and does not constitute financial or legal advice. RISE is not acting as a credit counseling or repair service, debt consolidation service, or credit services organization in providing this content. RISE makes no representation about the reliability or suitability of the information provided – any action you take based on this content is at your own risk.

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