How to manage a Christmas debt hangover

Christmas always puts a dent in household finances, so it’s little surprise that around a quarter of people are expected to pay at least some of the cost of a credit card, and one in seven are using the buy now pay later option to cover the cost of the celebrations.

But what seems like a shrewd money management tactic in December often looks much less promising when you’re faced with a debt crisis in January.

Some people will be worried about their debt anyway. Others will be lulled into a false sense of security by making very affordable minimum repayments; so they will miss how the debt was created behind the scenes. This means that anyone who borrows money can buy stock and come up with a solid plan to pay it back.

Your first priority is to follow the minimum repayments so you don’t end up with charges and fees on top of your debts. From now on, focus on paying off debts as quickly as possible.

If you want to avoid making repayments at the beginning of the month and borrow more at the end of the month, you need to be systematic about this. To free up more room for reimbursements, calculate the costs you can cut from your normal expenses and how much you can realistically repay.

Read more: 15 ways to save money while single

So, first think about the debts you want to pay off. There are two common approaches. The first is the avalanche method, where you pay off your debt with the highest interest rate first. This means you’ll pay less interest and can pay off your debt faster.

The second is the snowball method, where you erase the smallest debts first and build on the largest, so you have a sense of accomplishment. Financially, avalanches are more cost-effective, but some people will need snowball gains on a regular basis.

While doing this, it may also make sense to move the loans to a cheaper place, such as a 0% credit card. But there is one important stipulation: Consolidating your debts cannot be used as an excuse to continue building debt elsewhere. You need to draw a line in the sand.

For some people, the problems are more serious and harder to solve through money management alone. In these cases it is worth considering debt charities such as Stepchange.

They can talk you through your options and help you deal with companies you owe money to. It’s hard to turn things around when things are this bad, but you don’t have to do it on your own

For some people, repaying debts will be a short and painful experience, after which you can focus on your wider financial situation. For others, short-term debt tends to arise on a fairly regular basis. If that’s the case, you can’t use it as an excuse to neglect other parts of your finances.