4 Ways to Pay Off Holiday Debt

by Gary Foreman

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Did you end the holiday season in a bit of debt? Take these steps to pay off that debt and get out from under those holiday bills as quickly as possible.

Depending on which poll you use, Americans spent somewhere between $700 and $1,100 per family on Christmas gifts last year. For a good many shoppers, most of that spending went on their credit cards. And, if history is any indicator, those holiday debts won’t be paid off until May or June.

Suppose that you didn’t want to be laboring under those Christmas bills for months to come? Is there something that can be done now to get them paid sooner? Yes, there are things that you can do now to get holiday debts off your back. Let’s take a look at a couple of strategies you might want to consider.

1. Check for lower insurance rates

Insurance eats up a fair amount of the average family’s budget. Just home and auto insurance can run hundreds every month. For an expensive item, very few people do any comparison shopping. If you haven’t taken a look at your insurance in the last year, you may be giving money away.

The internet has made comparing insurance rates easier. There are a number of sites that provide comparisons. We like and trust this tool to compare current rates for auto insurance. You can learn more about home insurance rates here. You may also want to talk with an agent. Insurance policies can be confusing. Be careful before you make a switch. Make sure that you’re getting the coverage you need.

Don’t forget to ask about your deductibles. That’s the amount that you have to pay before the insurance starts to pay for the loss. Often raising a deductible to the next level can make a big difference in your premium. (See Is Raising Your Insurance Deductible a Good Idea?.)

Finding cheaper insurance pays two dividends. First, you’ve saved some money. Second, you haven’t had to make any changes to your lifestyle. Not bad!

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2. Consider adjusting your tax withholding

Another place to look for money is your tax refund. The IRS will send out checks to over 125.3 million taxpayers. The average refund check this past year was $2,827. For many workers, their tax refund is a once-a-year bonus.

Unlike the insurance saving, your IRS refund really isn’t “found” money. It’s actually your money. It’s just that during the year more money was withheld from each paycheck than was needed to cover your taxes.

Unlike the insurance idea, it’s just a one-time event. If you want a refund next year, you’ll need to overpay your withholding this year again.

But suppose that you don’t expect to get an IRS refund this year. Then how about finding a few extra dollars every work day?

3. Reduce lunch costs

If you work outside the home, you know that the cost of lunches adds up quickly. A simple sandwich in the company cafeteria or local fast food joint will cost you $4 or so by the time you include fries and a drink. If you can still go out to a sit-down restaurant, it’s easy to spend $10 when you include a tip. Many people work one hour per day just to pay for their lunch!

Many work places have a microwave oven available. That makes leftovers the ideal lunch. Instead of throwing out that extra serving from last night’s dinner or letting it turn green in the back of the refrigerator, take it to work for lunch!

If you have teenagers in the house, you might not have any leftovers. Then you’ll want to consider forming a lunch club. Each member of the club takes a turn preparing lunch for the whole group. You’ll probably want between two and five members. The group can decide whether it should be kept simple like salad and sandwiches or if they want something more substantial like casseroles. You’ll spend less time and money providing one meal for five people than buying lunch for yourself every day.

No leftovers and you work alone? Don’t give up. Perhaps you can bring in a bit more cash each month as oppose to cutting costs.

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4. Increase your monthly income or find extra cash

You can solve the problem by increasing your income. One way to do that is to ask your boss for a raise or for more hours.

If neither of those is possible, you might consider joining the 7.5 million Americans who hold a second job. In fact, it might do more than provide some extra income. You could learn a new skill or even try out an entirely different career path.

A second job is less stressful when it’s used to achieve a short-term goal like paying off Christmas debts. It’s easier to handle the extra workload when you know there’s an end in sight.

There are a lot of other ways to whittle down those holiday bills. Hold a garage sale, take some stuff to a consignment shop or sell them on eBay. Look for ways to reduce expenses. Cut your grocery spending. Or make your own household cleaners. Join a car pool.

So even if you overspent for the holidays, there’s no need to get down on yourself. Just figure out what will work best for you and then get started!

Reviewed December 2021

About the Author

Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's the author of How to Conquer Debt No Matter How Much You Have and he's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.

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