How to pay off Christmas debt

Posted on 27 December 2021

Written by Graeme Hamilton

It is January, the holidays have been and gone, and the Christmas credit card bills have landed on your doorstep. It is official – the holiday debt hangover has arrived. The last thing any of us want to do in the New Year is face endless credit card statements and savings accounts which have taken a knock, but often this is the reality of enjoying the festive season. In fact, one in four Canadians say they cannot afford the holidays despite wanting to enjoy it. So, how to pay off Christmas debt? And which bills do you pay off first? If this sounds like a familiar situation for you, check out the following article as we explain how to pay off Christmas debt and get your year off to a great start financially. It is best to tackle it straight away to get on the pathway to a debt free future sooner.

Face the music

It may not be what you fancy doing after the holiday season, but this first step is really essential. You need to assess the extent of your debts in order to understand what steps need to be taken. The sooner you are able to do this, the sooner you can work on a solution, free from the stress and worries of debt. This involves reviewing all of the debt you have, from credit card debt through to any payday loans or other debts you may have accrued. This should cover all your expenses made over the holidays, from gifts to Christmas parties to sales purchases to travel. A good place to start is running through any bank statements and credit card statements and tracking any debt owed. Next to each of these debts, you should include the date any payments are due, details of payment amounts, and interest rates on each debt. Overall, you will have the final figure of any holiday debt, which will help you to shape a pathway forward.

Build a budget

Now you know the extent of your holiday debt, here is how to pay off Christmas debt. See the New Year as a fresh start, and a great opportunity to reset your finances and free yourself of the associated stress and worries. Your next step should be to create a budget which factors in the Christmas debt you need to pay off and when, along with the income you are bringing in. A budget will really help by clarifying what you have and when you need to make payments. Factor in any fixed expenses you cannot avoid, and introduce ‘nice to haves’, cutting these back wherever you can. Once you have your budget in place, the next part is having the discipline to stick to it. It may help you to take out cash for essential payments so that you are not tempted to increase your spending on a credit card. As part of your budget, the main focus will be on creating a debt repayment plan. This plan should indicate realistic, manageable monthly repayments, working through the highest priority debts first, which are most likely those with the highest interest rates.

Repay your Christmas debt

With your plan in place, you should now know how to pay off Christmas debt. It is now simply a case of sticking to your debt repayment plan. If you are concerned that you may not be able to adhere to the plan or budget you set for yourself, you can automate the minimum payments on your debt. Of course, this method does not mean that you will necessarily chip away at your debt. In fact, most times, paying just the minimum payments will likely only cover the interest itself instead of the debt. Consider the most effective way of paying off Christmas debt – is it best to pay off the smallest debt first for a sense of achievement, or to chip away at the biggest debts? It is also a good idea to set yourself goals for the year, so you can reflect on your progress and also have milestones to aim for. These can be both short-term, like paying off a credit card, or long-term, like saving a downpayment for a property. These goals should be specific, down to choosing a quantity to reach, how you will achieve it, and a timeframe to make them more achievable.

Speak to a Licensed Insolvency Trustee

If you are still unsure on how to pay off Christmas debt, some additional help may be beneficial for you. A Licensed Insolvency Trustee is the role title that was recently used to replace the term ‘bankruptcy trustees’. In fact, they are the only professionals in Canada legally able to administer all forms of debt relief. This puts them in a great position to advise on your situation, and they can help you through forms of debt relief including credit counselling, consumer proposals, and bankruptcy. Although it may be prompted by the holiday season, debt at Christmas can imply money issues elsewhere, or mounting debt. It is important to remember that no matter how bad you may feel your financial situation is, there is always a form of debt relief to help. At Spergel, we have spent over thirty years helping Canadians become debt free and we are here to help you too. The sooner you address it, the sooner you can get your finances back on track.

Learn for next Christmas

The best thing you can take away when considering how to pay off Christmas debt is how you can learn from former mistakes and prepare for the future. Ask yourself how the debt has managed to creep up over the holidays. How could you act differently next time? And how do you ensure you do not face the same situation next year? Preparation always helps, too. With a whole year ahead of you, you can begin to plan for the holidays. Check out our guide on how to create a Christmas budget. You can do simple things like save throughout the year for the holidays, and build up rewards points to use for gifts or holiday travel. You can also review your highest expenditures over the holidays, and work on how to reduce these for next year.

If you still need advice on how to pay off Christmas debt, book a free consultation with one of the reputable Licensed Insolvency Trustees at Spergel. We can help you recover from holiday debt, as well as review your financial circumstances and get you on the pathway to financial freedom. We believe the holidays is a time to be enjoyed, and that begins with getting your finances in order. Get in touch today – you owe it to yourself.

Graeme Hamilton

Graeme Hamilton

Graeme Hamilton is a Chartered Insolvency and Restructuring Professional with over 10 years’ experience as an LIT (Licensed Insolvency Trustee). He is also Spergel's resident expert on bankruptcy and debt relief in the Ontario region. Prior to establishing his career in the insolvency industry, Graeme lived in Cambodia doing volunteer work with NGO's.

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