Breaking the Post-Holiday Debt Cycle

The holidays are a season of joy and family, and let's be honest, spending too much money on stuff you swore you'd keep under budget. Things like that inflatable snowman you just had to have - we've all been there. Now that the lights are packed away and the credit card statements are rolling in, you might wonder, "Did I need expedited shipping on everything?"

You're not alone if your wallet feels light after the festivities. Andrea Woroch, a consumer and money-saving expert, said in a U.S. News article that "Millions of Americans are living paycheck to paycheck and just didn't have the extra money to pay for holiday purchases."1 The good news is that you can bounce back and start 2025 on the right financial foot with a few smart moves. Let's tackle the post-holiday debt blues together!

person breaking cycle with money, gifts and credit cards

First - Assess the Damage

Like most things in life, you don't know how to get where you want to go if you don't know where you're at. So, let's start by understanding where you stand with your debt.
  • Review your credit card and bank statements to calculate your total holiday spending.
  • Break it down: What needs immediate attention, and what can be addressed over time?
  • Figure out how much you owe on each account and the interest rate so you can prioritize what you pay off first.

Create a Post-Holiday Budget

All "new year, new you" cliches aside, January is the perfect time to reset your budget. It doesn't have to be overly complicated.

  • Prioritize essentials like rent, utilities, and groceries.
  • Set aside funds for debt repayment.
  • Use the 50/30/20 rule: 50% for needs, 30% for wants, and 20% for savings or debt.
  • For more in-depth take on determining your budget, visit our blog Change the way you think about budgeting.


Tackle High-Interest Debt First

Since you have already determined your debt and interest rates on your accounts, you're ready to start paying off some of that Christmas cheer.

  • There are two approaches to paying down your debt. The avalanche method involves paying off your high-interest debt first. This method is the best approach for saving the most money and paying debt off quickly.2
  • Or maybe you just need some quick wins to keep you motivated. If so, the snowball method of starting with the smallest balances may be the best approach for you.
  • Also, always make more than the minimum payments whenever possible.


Dry January (For Your Spending)

Yes, it's a thing for your spending as well. You can commit to "No-Spend January" and challenge yourself to spend on essentials only for the month.

  • Cook at home instead of dining out.
  • Revisit old gift cards or use rewards points for purchases.


Rebuild Your Emergency Fund

If holiday expenses drained your savings, make rebuilding a priority in your budget as well.

  • Start small: Even $10 a week adds up.
  • Automate your savings with automatic transfer tools.
  • Use savings programs like P1FCU's like Save Your Change - a little will add up over time.
  • Read more about emergency funds in our blog, Your financial roadmap in the game of life.


Recovering from holiday debt might feel overwhelming, but it’s also a chance to reset and take control of your finances. By assessing where you stand, creating a plan, and sticking to your goals, you can turn post-holiday stress into a financial success story for 2025.


Remember, every small step matters. Whether it’s tweaking your budget, cutting back on non-essentials, or consolidating debt to reduce interest payments, these actions will help you regain financial balance.


This is for educational purposes only and not financial advice.
References
1 U.S. News & World Report. (n.d.). Spent too much on the holidays? Here's how to manage a holiday debt hangover. Retrieved January 15, 2025, from https://money.usnews.com/money/personal-finance/spending/articles/spent-too-much-on-the-holidays-heres-how-to-manage-a-holiday-debt-hangover
2 Forbes Advisor. (n.d.). Debt snowball vs. debt avalanche: The best way to pay off credit card debt. Retrieved January 15, 2025, from https://www.forbes.com/advisor/credit-cards/debt-snowball-vs-debt-avalanche-the-best-way-to-pay-off-credit-card-debt/