You're not alone if you tend to overspend during the holiday season. Many people go into the red to celebrate, digging themselves into a deeper financial hole.
The average consumer who took on holiday-related debt in 2023 racked up nearly $1,000 in expenses.1 Unfortunately, more than one-third of the same shoppers surveyed said paying off the gifts and festivities would take them at least five months.
When holiday spending impacts your budget for half of the following year, achieving other financial goals can be difficult. We’ll share how to get your finances back on track after the winter merry-making and gift-giving season. That way, you can spend more time focusing on other money-related objectives.
Your first reaction to your overspending may be shame, guilt, anger, or sadness. While those feelings are normal and understandable, they don’t help you solve the problem.
Instead, try to stay positive. Think about what your spending helped you achieve. Perhaps you traveled to see an ailing loved one or saw your child’s face light up when they opened the best present ever. Yes, you need to adjust your money management habits, but treasure the joy and gratitude you feel because they’re priceless.
Now that you’re in a better frame of mind, it’s time to face the numbers. Gather your banking and credit card statements and add up every holiday expense including gifts, meals, and travel.
From there, you can determine exactly how much you spent and how much debt (if any) you accumulated. If you tapped into (or depleted) your savings to pay for your holiday festivities, you can look toward replenishing every dollar you spent.
If you took on debt, you must pay it off as soon as possible especially if it’s high-interest credit card debt. Fortunately, you have some options when it comes to addressing your holiday debts.
Stop adding to the balance: Put your credit cards away until the debt is repaid.
Choose a repayment method: The debt snowball method prioritizes repaying your debts from smallest to largest, helping you build momentum. The debt avalanche method prioritizes repaying your debts in order of highest to lowest interest rate, saving you money in interest.
Consider a balance transfer credit card: You may be able to transfer all of your credit card debt to an account with 0% interest for a set period, saving you money during repayment.
Pay more than the minimum due when possible: Doing so will reduce how much you pay in interest and will get you out of debt sooner.
Ask for a lower interest rate: If your account is in good standing, the company may be willing to oblige you.
Pro Tip: Using a credit card calculator can help refine your debt payoff strategy.
You can get your finances back on track faster using your existing income more strategically. While the festive season is over, you may still be operating in holiday mode and spending money out of habit. If that’s the case, you first need to return to your pre-holiday spending patterns.
Once you’re back to your normal budget, it’s time to examine your regular expenses critically. Are there any costs you can reduce or eliminate? You may save a significant sum by scaling back on discretionary spending such as monthly subscriptions, dining out, and online shopping.
You could also find more money in your budget by lowering your spending on essentials.
Consider shopping sales, buying generic goods, or visiting thrift stores. Contact your service providers and try negotiating your cable, internet, cell phone, and medical bills. Use any money you save to pay off debt or increase your cash cushion.
Optimizing your expenses can only take you so far. For the fastest results, you may also need to increase your income. Depending on your situation, you may be able to:
Work overtime
Ask for a raise
Start a side hustle
Sell unused belongings
As soon as the extra money hits your bank account, put it toward your financial recovery. That way, you won’t have the chance to spend it elsewhere.
Pro Tip: If you receive a work bonus, tax refund, or inheritance, look to use those funds to expedite the process.
While getting back on track after the holidays is important, try to remember your other financial goals. For example, you may want to continue to save for retirement as you pay off seasonal debt especially if you receive a matching contribution from your employer.
If you didn’t take on new debt over the holidays, it’s generally wise to replace the cash you spent and pay off existing debt. There is one exception, however. You may want to regard high-interest credit card debt as a financial crisis and prioritize repaying it over saving and investing (beyond establishing a modest emergency fund).
Since the holiday season happens every year, you can save up for it a little at a time in advance rather than deplete your savings or rack up debt. Here are a few tips for how to plan ahead.
Estimate how much money you’ll need to pay for the upcoming holidays (or use the total amount you spent last season).
Divide that figure by the number of months until the next holiday season to determine how much you need to save per month.
Set up direct deposit or an automatic funds transfer into your savings account for the monthly amount.
Pro Tip: If you find extra money in your budget and you’ve already paid off your bills from last year, add that cash to your holiday fund to help you achieve your goal faster.
The holiday season can be an expensive time of year, but if you’re not careful, spending can derail your finances for months to come.
However, with some planning and discipline, we can stay on track. You may want to speak with a financial professional if you'd like personalized guidance on how manage your savings and spending goals.
1 “Average Holiday Debt Plummets to $1,028 – Down 34% Since 2022 and the Lowest Since 2017” Lending Tree, December 2023
This article is provided for general informational purposes only. Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.
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