The holiday season is here—Diwali is in full swing, and soon Christmas and New Year will be knocking on the door. Besides lifting spirits, it's also the time when many plan their vacations and getaways. Some people travel to be with their families and enjoy Diwali or Christmas, while others choose popular destinations like Goa, Thailand, or Bali, to ring in the New Year with flair.
Even if you are not considering a vacation this festive season, you are likely to be
busy with holiday shopping, decorating your home, and spending time with friends and family. Festive seasons are enjoyable, but we often go a bit too far with celebrations, resulting in significant expenses.
With vacations, shopping, home decor, and more in the mix, festive seasons become a reason for us to spend extravagantly. Surprisingly, it's the time when many amass considerable debts that can be challenging to settle later. In fact, managing holiday debt can be tough without a well-thought-out plan.
Here are a few ways to get rid of your holiday debt.
Stick To A Tight Budget:
Budgeting can help you effectively clear any kind of debt, including holiday debts. While creating budgets could be easy, implementing them can be challenging.
To start with, create a thorough budget by monitoring your income and expenses. Spot unnecessary costs to cut and highlight areas where expenses can be reduced. When planning, prioritise essential needs and resist indulging in luxury. Staying disciplined is key to successful implementation.
After creating your budget, stick to it diligently. Save money by skipping weekend outings to bars and restaurants, opt for public transport over cabs, cook at home instead of ordering out, and consider more affordable mobile plans. These small, yet impactful measures in cost-cutting can boost your savings and aid in paying off holiday debt. Taking it one step at a time can yield remarkable results.
Give Priority To Debts With Higher Interest Rates:
While festive shopping or organising a vacation, credit cards often appear appealing with their 'buy now, pay later' feature.
Says Adhil Shetty, CEO of BankBazaar.com: "However, continuous swiping accumulates credit card bills, leading to a significant burden of credit card debt. If you used multiple credit cards during your vacation, it's smart to prioritise paying off the card with the highest interest rate. By tackling high-interest debt first, you can save money that would otherwise go towards interest payments. Given the current high credit card interest rates, approaching around 36-42 per cent annual percentage rate (APR). The sooner you clear the debt, the less money you'll lose from your account."
Consider Paying More Than The Minimum Required Amount:
In the realm of credit cards, few things are as detrimental as only paying the minimum balance. Experts note that a significant portion of holiday expenses is often covered by credit cards. However, if you can't settle the full balance before the billing cycle, debt starts to accrue, and before you realise it, it becomes a financial challenge.
Says Shetty: “When managing credit card debt, aim to pay beyond the minimum amount. This not only speeds up clearing the balance, but also saves money that would otherwise go towards interest. Consistently paying a bit more than the minimum due will lead to a gradual reduction in your holiday or credit card debt."
Combine Your Debts:
If you have been excessively using your credit cards this festive season, you should be naturally worried about a massive credit card bill heading your way.
Says AK Narayan, CEO, AK Narayan Associates, a financial planning firm: "If you have used multiple high-interest rate credit cards, it's recommended to consolidate your debt by transferring all balances to a zero per cent APR card. Keep in mind that the zero per cent APR is temporary; so aim to clear your debt within that timeframe. By consolidating balance transfer, you can save money that would have otherwise gone towards covering high credit card interest."
Clear Out Unused Household Items By Selling Them:
Holidays and festivals are meant for joyful celebrations with loved ones, but our finances often take a hit as we indulge in extravagant spending. With holiday debt looming, you can lighten the financial load by selling items you no longer need at home.
So, you can retrieve the vacuum cleaner you don't use and sell it online for a good price. Also sell your old car, if it is sitting idle for a long time. Just by surveying your home, you can find unused items to sell on platforms like OLX, Quikr, etc., thus earning money to make a dent in your holiday debt.
Make Extra Money On The Side:
Our hobbies and passions define us, and during financially challenging times like the post-holiday season, where you are working to clear your holiday debt, consider turning your hobbies into extra income.
For those who are artists, explore paid gigs at events in and around your city. Look into part-time jobs with good pay, such as freelance writing or online tutoring. If you are the sole provider in your family, encourage your spouse or partner to find a job and contribute extra income towards clearing holiday debt.
Pause Your Shopping:
Imagine this: the holiday season has just passed, leaving your finances unsettled. However, with a significant upcoming event like a wedding anniversary, children's birthday, or a dear one's wedding, the temptation to shop arises again. You reach for your credit card to purchase an expensive gift. Halt right there.
Adds Narayan: "Avoid shopping after the holiday season, especially when you already have a stack of holiday debt. Instead, consider do-it-yourself (DIY) gifts for upcoming special occasions; it's the sentiment that matters. If you tend to impulsively shop, leave your credit card at home to curb those urges. While pausing shopping may not seem like the ideal solution for holiday debt, it indirectly aids by preventing additional credit card expenses and saving money for debt clearance."
While easier said than done, following these steps can help you become debt-free after the holiday season. It's advisable to plan ahead for the next holiday season to avoid accumulating significant debt. From creating a separate holiday savings fund to using credit card reward points for gifts, there are various ways to ensure a debt-free holiday without compromising on the festive fun. The goal is to partake in celebrations without burdening your wallet
