It was fun while it lasted — splurging on gifts, celebrating the new year in a big way or going on that pre-holiday getaway to relax — but for many, the “fun” included presenting plastic to pay and losing track of just how much was spent. You may have even thought, “I’ll worry about it later.” As with any other kind of overindulgence, later does come, and with it, sometimes pain and regret about things you barely remember and an overwhelming wish to just make it go away.
So how do you cure a debt hangover? Your preferred method may be to head back to bed and pull the covers over your head — especially in the headache-y, can’t-think-straight, turn-off-the-lights glare of morning — but it won’t get you very far. With the most appealing option eliminated, how do you get rid of that queasy, wish-I-hadn’t feeling? You have some options.
1. Hair of the Dog
Excessive borrowing caused the problem, but could just a little bit of eyes-wide-open borrowing help? Maybe, if you’re careful. Consolidating high-balance credit cards at a lower rate could potentially save you money and help your credit scores. How? Let’s say you’ve run up a $3,000 credit card bill on a credit card with a limit of $5,000. Divide those numbers and you’ll learn that your debt usage ratio is 60%. In other words, your balance is at 60% of your available credit. That’s high, and your credit scores are likely suffering as a result. It’s a good idea to keep your credit utilization under 25%, and under 10% is even better.
If you can get a new balance transfer credit card, you may be able to shift some of that debt over to a new card. Some balance transfer cards offer 0% for 15 to 18 months. You’ll need good or excellent credit to qualify for a low-rate balance transfer, and you will need to have a plan for paying it off before the introductory rate expires (here’s a credit card payoff calculator to help with the math). If that’s not a possibility, you could consider getting a personal loan at a low fixed rate to consolidate. (But remember that re-arranging the debts doesn’t make them disappear. You’ll still have to make some cuts elsewhere until the debt is paid off.)
2. Drinking Lots of Water
Drinking lots of water can help you flush toxins from your system and re-hydrate when you’re dealing with a real-life hangover. In much the same way, you can help yourself by flushing out “toxic” spending habits and eliminating them from your household budget. For this you’ll need to track spending for a month. Try to see where you are spending unnecessarily and figure out how to redirect resources to the holiday spending overage. (Bonus: Those “healthier” financial habits could mean you have money to save once you’re done paying down the debt.)
3. Gentle Exercise
Make sure that when you are budgeting that you have some balance — a restrictive budget with no room for fun is one you’re likely to rebel against. When you are dizzy and weak isn’t the time to practice kickboxing. Ease into it. Take responsibility, but don’t imagine that one miserable, sweaty session is going to make up for anything. It will more likely leave you defeated, sore and reluctant to try again. You may want your holiday debt gone this minute (who wouldn’t?) but instant solutions — think payday loans — are not your friend.
Now let’s look at your usual habits. For example, does caffeine make you focused or jittery? If you’re going to get a caffeine withdrawal headache if you forgo coffee, that will make a hangover worse. But if you’re not at risk of a headache, you really don’t need to add to the mix already roiling your stomach. Similarly, you have to make a judgment call about credit cards. Do you normally use them responsibly? Or did you just go a little crazy during the holidays? If you need to take a break from spending until your cards (or personal loan) are paid down, do it. Making on-time payments will keep those accounts active so you don’t have to carry the cards in your wallet. Even if you are normally a heavy coffee drinker (or card user), go easy to get rid of a hangover.
It settles your stomach and soothes your headache — meaning when you have multiple problems, you need multiple solutions. Holiday overspending can do more than cause a debt. It could make you painfully aware that you don’t have an emergency savings cushion, or that you didn’t shop with a list (you are far from alone, by the way). But your overindulgence could hurt your credit score, particularly if you first try the old sleep-it-off cure and end up paying late. Go for a two-fer. Make sure you are saving and paying off debt (on time). You can get an idea of how you’re doing credit-wise with a free credit report summary from Credit.com; it comes with some personalized recommendations for keeping your credit healthy.
Plan for Next Time
Whichever kind of hangover you’re recovering from, it’s a good bet you’d like to avoid one next time. Whether you carefully count your drinks and know how many you’ll allow yourself, or develop a spending plan that includes gifts and entertainment — keeping track can keep you out of trouble. So next year, instead of waking up and wishing you could have a do-over on some of those holiday spending decisions, you just may be figuring out where you want to go on vacation to escape dreary winter days. That “problem” seems a lot more appealing.
More on Managing Debt:
- How to Pay Off Credit Card Debt
- 5 Tips for Consolidating Credit Card Debt
- The Best Way to Loan Money to Friends & Family