Debt Management for the Holidays: Give Yourself the Gift of a Debt Payoff Plan

In our Guide to Credit, we talked about how the way you manage borrowed money can become part of your credit history. But what happens when your balance starts getting bigger than you'd like?

Maybe an unexpected car repair landed on your card. Maybe groceries, childcare, or everyday expenses have been stretching your budget. Or maybe a few “we'll deal with it later” purchases added up faster than expected.

Whatever got you here, the next step is figuring out where you stand and making a plan to move forward. And with the holiday season approaching, now is a good time to start.

Start With What You Owe

It's hard to make progress on debt without a clear picture. If you have balances across multiple credit cards, write down the basics for each one:

• Current balance
• Interest rate
• Minimum payment
• Payment due date

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Then add up your total credit card debt.

That number may be uncomfortable to look at, but knowing where you stand gives you a starting point. Instead of trying to manage several balances in your head, you can begin making decisions with the full picture in front of you.

Find Some Breathing Room in Your Budget

Next, look at your monthly spending and see what you can realistically put toward your balances. The key word is realistically.

You still have groceries to buy, bills to pay, kids to take care of, and a life to live. You don't necessarily need to eliminate every nonessential expense to make progress.

Instead, look for expenses you could temporarily reduce. That might mean:

• Eating out a little less
• Pausing a subscription you aren't using
• Cutting back on impulse purchases
• Delaying a nonessential purchase
• Planning lower-cost activities for the family

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Even small changes can free up money to put toward your debt. And because this doesn't have to be your budget forever, think of it as a short-term adjustment that helps you move toward a bigger goal.

Choose a Payoff Strategy

Once you know how much extra you can put toward your debt, decide where that money should go. Two common approaches are the avalanche and snowball methods.

Avalanche Method

With the avalanche method, you focus extra payments on the credit card with the highest interest rate while continuing to make required payments on your other accounts. Once that balance is paid off, you move to the account with the next-highest rate.

This approach prioritizes higher-interest debt, which can help reduce the amount of interest you pay over time.

Snowball Method

With the snowball method, you focus on your smallest balance first while continuing to make required payments on your other accounts. Once the smallest balance is gone, you take the money you were putting toward it and add it to your next-smallest balance.

Seeing balances disappear can give you a sense of progress and help you build momentum.

Neither method has to be the “right” choice for everyone — choose an approach you can stick with.

Try Not to Add to the Balance

Paying down debt gets harder when new purchases keep adding up.

If possible, give your credit cards a break while you focus on paying them down. For everyday purchases, use money you've already accounted for in your budget when practical.

That can be especially important heading into the holidays, when gifts, travel, food, decorations, and activities add up. Before reaching for your credit card, ask yourself: 

• ‍Do I have room for this purchase in my budget, or am I creating a payment for later?

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That one question can help keep a temporary expense from following you well into the new year.

Make It a Challenge

Give your payoff plan an extra boost with a short no-spend challenge. 

Choose a weekend or a week and limit spending to essentials you've already planned for. Get your partner, family, or a friend involved and look for free or low-cost alternatives to your usual spending. Then, take the money you would’ve spent and use it to pay down your credit card debt. 

You don't have to stop spending forever. The goal is simply to see what a few intentional choices can do — and maybe discover a couple of expenses you don't miss as much as you expected.

Keep Your Credit in Mind

Remember that credit card debt and your credit aren't completely separate.

As we covered in our Guide to Credit, your payment history and the amounts you owe are among the factors that can influence your credit score. That makes two habits especially important while you're paying down debt: making on-time payments and lowering your balance(s).

Progress doesn’t happen overnight, and that's okay. Consistency matters.

Head Into the Holidays With a Plan

The holidays can put extra pressure on almost any budget, especially when you're already managing debt. Before the season gets busy, decide how much you can comfortably spend on gifts, meals, travel, and celebrations without derailing your progress.

Remember, creating a memorable holiday doesn't require creating months of payments afterward.

If your debt feels overwhelming or you're unsure where to start, you don't have to figure everything out on your own! Our financial education resources can help you build your financial knowledge, and the Trax team is here to help you understand your options.

A balance doesn't define your financial future. Start where you are, make a plan that works for your life, and keep moving forward.