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How to deal with a holiday debt hangover

What's even more painful than the "morning-after" hangover you may feel after too much holiday cheer? The "month-after" holiday credit card bills! Here's how to make a quick recovery — and prepare your wallet for next year.
/ Source: TODAY contributor

What’s even more painful than the “morning-after” hangover you may feel after too much holiday cheer? The “month-after” holiday credit card bills! Each year millions of us vow that we will stick to our holiday budgets only to find ourselves more in debt than ever. The good news is that there are steps we can take to ease the pain and make sure that we don’t end up in the same place again next year.

If you, like so many of us, put the bulk of your spending on a credit card, the first thing you must do is decide to make getting out of debt a priority. If you’re still using that card and you’re carrying a balance, you have not made it a priority. Take the following steps to rid yourself of this holiday hangover as soon as possible.

  • Use debit cards and cash until you have eliminated your credit card debt. It will keep you more in touch with your spending.

  • Don’t pay penalties. Make sure you pay at least the minimum on every card each month on time.

  • Pay at least the minimum using one of two strategies: Pay off the card with the highest interest first. You’ll pay less in the long run. Or, pay off the card with the lowest balance first. It’s very satisfying to pay off a debt in full. It can be a great motivator.

As you take steps to reduce your credit card debt, it is imperative that you figure out what drove you to overspend in the first place, if you want to avoid the holiday spending trap next year. Telling someone to stop overspending without figuring out why they’re doing it to begin with is like telling someone to stop overeating without finding out what’s driving it. They may be able to change the behavior for a time, but sooner or later old habits will creep back. Arm yourself with awareness and understanding and you will find the resources to make the changes you desire.

My research has shown that the same three factors drive our spending and financial decisions:

1. The first lessons we learn as children have a huge impression on our adult behavior. For many of us, our parents were working. They tried to compensate for not spending time with us by buying elaborate gifts that they probably couldn’t afford. Maybe that’s what you saw growing up. Are you doing the same with your kids?

2. Social messages cost us dearly: Advertisers tell us what you must have and what you must give in order to be good people and good parents. The financial industry tells us it’s perfectly normal to pay for these things on credit. We blindly follow this message right into credit card debt we’ll be paying for years.

3. How you perceive yourself: Am I the person who always picks up the check? Am I the person who has to send out 500 Christmas cards? Am I the guy who gives his wife expensive jewelry? These perceptions play out in your financial choices. You can actually put a dollar value on them!

The best way to stand up to these deeply conditioned influences is to be clear on your goals. In this case, the goal is easy: Get out of holiday debt. The key is to be specific: “I want to pay $1,000 off my credit card within six months.” “I want to put $500 back in my savings account by March.”

Also, stay connected to your big-picture goals: “I want to put $3,000 in my child’s college fund this year.” “I want to contribute $5,000 to an emergency fund.” When you clarify your goals, it becomes clear that you can’t achieve them if you’re paying off credit card debt. This is about motivating yourself to stick to your plan.

Start off the new year by setting three financial goals for the year. Also, do yourself a favor and join a Christmas or holiday saving club. The extra savings will take a lot of the stress out of holiday spending next year!