What was the most wonderful time of the year is now one hell of a holiday hangover.

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For many Americans, getting in the holiday spirit also means getting into a lot of debt.

One week before Christmas, LendingTree polled more than 2,000 Americans on their holiday spending. The most alarming result of the online survey is that 1 in 3 admitted they were more than $1,200 in debt for gifts, travel plans, and party supplies.

That wasn’t just on credit cards. Some used payday loans and “buy now, pay later” financing options while shopping online. Nearly half said they wanted to consolidate that debt or shop around for a 0% balance transfer credit card.

Matt Shulz, LendingTree’s chief credit analyst, says the first step to paying down that debt is creating a budget.

“You can’t make a meaningful plan to tackle debt unless you know exactly how much money is coming in and going out of your household on a regular basis,” he says. “Once you know that, you can take stock in your spending and shift things around to match your priorities, including freeing up money to pay down debt.”

Below we breakdown tips on how to pay off that holiday debt.

Build a budget

Budgeting is easier than ever now with digital platforms like Mint and You Need a Budget (YNAB). You simply download the app and link it to your bank account. Once set up, input your income and expenses. This lets you see your spending and stick to your spending plan.

But you may be like the 60 percent of Americans who said in a Debt.com budget survey they prefer budgeting with a pen and paper. It’s a bit more work but the same steps apply. Write down how much you earn and typically spend. You can set a realistic plan to pay down that holiday debt once you know how much you’re working with.

Find out: How to Create a Budget and Stick to It

Debt snowball or avalanche

Now that you’re armed with a set budget it’s time to attack the debt. Your weapon is the set amount of money. Set a calendar notification to make payments and make sure those payments are far more than the minimum.

For many, holiday spending may not be their only debt. Evaluate these debts to see which has the highest balance and which has the highest interest rate. There are two strategies to tackle those debts: snowball and avalanche. Here’s how it works…

The snowball method is when you focus your largest payments to the debt you owe the least on. Make minimum payments on your other debts. Once you clear the balance of that small debt, take that amount plus the minimum you already spend and knock down the next debt.

Some finance experts say the avalanche method is more effective. It’s when you focus your largest payment to your debt with the highest interest rate. Interest doesn’t matter to the actual balance of a debt, so it’s literally money flushed down a toilet. May as well rid yourself of that burden ASAP. Speaking of.

Find out: Avalanche vs. Snowball: Which is the Best Way to Pay Off Debt?

0% balance transfer

This can be controversial in some eyes. That terrible interest thing can be avoided if you’re able to open a 0% balance transfer credit card to move the credit card debt. Here’s how it works: The average credit card interest rate is about 16 percent. That means you pay 16 percent in addition to the balance you owe. It’s basically a fee for borrowing money.

There are credit card companies that offer promotions where you transfer the balance on a card charging 16 percent to one of its cards with 0 percent for a limited amount of time. It gives you the ability to focus payments on just the amount you owe.

There are flaws to this plan. Some people still only make the minimum payments or fall behind and get stuck paying interest anyway when the offer expires. It’s only worth doing when you stick to the plan.

Find out: How to Transfer Credit Card Balances

Consolidate debt

This has similarities to transferring your credit card balance. Debt consolidation is when you roll your debts into one. You do this by shopping for a debt consolidation company. They offer loans with typically lower interest rates than the debts you owe.

This type of debt relief allows you to laser focus on monthly payment. Other debt relief options like debt settlement can be quicker, but damage your credit score. A major pro to debt consolidation is it won’t hurt your credit score and will help after the balance is down. Debt-to-income ratio makes up the largest chunk of how your credit score is determined.

At the end of the day the way out of debt starts with a budget and takes dedication. Pick the plan that works best for you and your lifestyle and stick to it. With a road map and discipline, you’ll be waving goodbye to that holiday debt.

Find out: Debt Consolidation for Every Type of Debt

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About the Author

Joe Pye

Joe Pye

Joe Pye started writing about debt and personal finance five years ago while attending Florida Atlantic University, where he served as Editor-in-Chief of the student-run newspaper, the University Press. Before graduating with a bachelor's degree in multimedia journalism, Pye placed as a finalist for the Mark of Excellence award by the Society of Professional Journalists Region 3 for feature writing and in-depth reporting. In 2021, Pye earned First Place in the Green Eyeshade awards for "Best Blog" for his side-project BrowardBeer.com. Since taking a full-time position as associate editor at Debt.com in 2018, Pye has become a certified debt management professional who's applied what he's learned to his personal life by paying down more than $22,000 worth of combined credit card, student loan, auto and tax debt in less than two years.

Published by Debt.com, LLC