How to cure (and prevent) that post-holiday debt hangover

January is here – and with it, your bills from your December celebrations. If you’re feeling weighed down by debt, even the thought of tackling it can feel overwhelming. The good news? Making a plan to reduce that debt (and prepare for next year’s holiday spending) is easier than you think.

Here are some tips to help you tackle that tally and improve your financial health this year.

If you overspent a bit, but your debt seems manageable, consider these strategies to help you pay off your credit card balance more quickly.

Made a New Year’s resolution to declutter your home? Turn it into a win-win! Sell the items you no longer need and make a little extra cash to pay down your credit card balance and tackle debt repayment. Platforms like eBay, Facebook Marketplace, or Poshmark are perfect for selling unused or like-new electronics, clothing, furniture and more.  

If you have some spare time, consider a side hustle to earn extra income. Freelancing, driving for ride-sharing services, or working part-time in retail can make a big difference when it comes to debt repayment. Funnel the extra income you earn directly to your outstanding balances to make larger monthly payments and pay off high-interest credit card debt more quickly.

Check if you can redeem credit card points or loyalty rewards to pay down your holiday debt. For example, Scene+^TM allows you to earn points on everyday purchases, with even more rewards when you use Scotiabank’s debit or credit cards that earn Scene+ points. You can also redeem your points towards your credit card balance to cut down your credit card debt. 

Some credit cards offer an incentive to transfer your balance. This option may give you more time to pay off your debt without accumulating as much interest on your credit card debt. Pairing these strategies with a high-interest savings account could help reduce your overall debt even faster.

Think about applying for a personal loan for debt consolidation to help reduce your interest rates and streamline your payments. Scotiabank offers a Scotia Plan Loan to help consolidate your debts and reduce interest costs.

Make sure to compare the annual percentage rate (APR) of your current debts with that of the loan to make sure you’ll save money in the long run.

Credit card debt larger than you expected? Consider these two popular strategies to tackle it:

1. Debt avalanche method: This strategy is about tackling your highest interest rate debt first while making minimum payments on the rest. You’ll pay less in interest overall, which will help you pay your credit card debt faster. But you’ll need patience and discipline, and you may have to wait a while before seeing progress – especially if your highest-interest debt is on the larger side. Stick with it, though – this approach is a smart way to knock out debt without feeling the financial strain for too long.

2. Debt snowball method: Like making a snowball, this debt repayment approach starts with small amounts that gradually make a big impact. Start by paying off the debt with the lowest balance first, then move on to the next smallest and so on. You’ll get a psychological boost as you knock out smaller debts quickly and build momentum. On the downside, it may take longer to pay off your larger debts, and because you're not focusing on high-interest debt first, you could end up paying more over time. But, if you stay committed to making at least the minimum payment on your larger debts, you'll gradually reduce the amount of debt you owe.

Next season may seem far off, but planning now can save you stress and money. It helps to think ahead while this recent holiday's spending (and any overspending lessons you learned) is fresh in your mind. Start by setting a realistic budget for gifts, food, travel and entertainment and stick to it to avoid overspending and racking up credit card debt. Here’s how to create a holiday budget that works:

• Pinpoint your expenses: List all potential expenses for gifts, food, travel, and decorations. Don’t forget smaller costs like greeting cards and postage.
• Determine what you can afford: Once you have a rough estimate, break down how much you can assign to spend on each category. Be realistic about what you can comfortably afford without relying on credit cards.
• Monitor your spending: Keep track of your spending throughout the holiday season. Check out Scotia Smart Money by Advice+, a free money management tool in the Scotia app that will make it easy to track your bills, monitor your spending and manage your cashflow.^†   

It’s never too early to start preparing for next year’s holiday expenses. Get ahead of the game by paying down this year’s debts, then budgeting and saving throughout the year. Give yourself the best gift of all – financial peace of mind.