Holiday Debt Detox

Recover from Holiday Spending and Prepare for Next Year

Personal Debt Series

This article is part of the Personal Debt Series, where we offer practical strategies to pay off debt, achieve financial freedom, and find the emotional support you need along the way.

In "Gifts for Nearly Nothing", I share ten nearly-free gift ideas for the holiday season. But even the most budget-conscious spender can benefit from a "holiday audit" to see exactly where their money went. It’s common to find areas where we overspent or incurred unexpected costs. In this article, I’ll walk you through essential steps to help you recover financially after the holidays—and even get ahead for next year.

STEP 1: Rank your holiday spending categories.

Start by ranking your holiday spending categories from highest to lowest. Here’s an example of typical categories to help you identify where you spent the most: Gifts – family, friends, coworkers, teachers, etc.

Holiday Travel – airfare, gas, car rentals, accommodations.

Food and Drinks – groceries, holiday meals, dining out.

Hosting Expenses – supplies for hosting guests, party favors, cleaning.

Decorations – tree, lights, ornaments, outdoor and indoor decor.

Entertainment – seasonal holiday activities (eg: ice shaking or visits to Santa) and event tickets (eg: concerts).

Charitable Donations – contributions to organizations or causes.

Clothing – special holiday outfits, winter gear.

Home Preparations – minor home improvements, extra furniture. Utilities – increased costs due to heating, holiday lights, and hosting.

Self-Gifting – purchases for personal enjoyment (eg: sale indulgences, seasonal shopping).

Gift Wrap and Packaging Supplies – wrapping paper, gift bags, ribbons, and bows.

Cards and Postage – holiday cards, stamps, and mailing costs.

Subscriptions – renewing or purchasing streaming services, seasonal memberships, or gift subscriptions. Miscellaneous Expenses. All other unplanned holiday-related expenses. Make a “lessons learned” note next to each category to reflect on what worked well and what didn’t. This will be invaluable in planning and staying within budget next year.

STEP 2: Create a "Holiday Overages" Line Item in your Yearly Budget:

Once you’ve made your list, identify any areas where you went over budget. Even if you have the funds to pay it off, categorize these overages as a line item called “Holiday Overages” in next year’s overall budget. This will help you create a plan to manage and pay off these costs, track holiday spending more accurately, and avoid similar surprises in the future.

STEP 3: Build a Strategic Payoff Plan:

Decide how to tackle your holiday debt. You can either prioritize paying it off as quickly as possible or incorporate it into your broader yearly budget. Here’s how to decide:

Option 1: Pay It Off First – If you feel overwhelmed by the holiday debt or want to start the new year with a win, paying it off early could be the best choice. High-interest debt is especially important to address quickly, as it saves you money in the long run and gives you a boost of momentum.

Option 2: Integrate with Your Budget – You may prefer a more gradual approach, where your holiday debt is folded into a manageable, year-long plan. Adjust your monthly budget as needed without having to make drastic changes. This allows you to keep holiday debt in perspective and stay focused on other financial goals.

Both strategies aim to help you regain control over your finances, so choose the one that best aligns with your situation.

STEP 4: Make Smart Adjustments to Your Yearly Budget

Review your yearly budget to identify areas where you can tighten expenses to offset your holiday overages. Start with discretionary categories like dining out, subscriptions, gifts, and personal treats. You might also try a "No-Spend January" challenge or a "Reduce by 25%" challenge, to cut back on non-essential spending until your holiday overages are paid off.

STEP 5: Regain Control with Small Wins

Small wins can boost your confidence as you work to eliminate holiday debt. Consider these ideas:

Sell or Return Items – Unwanted holiday gifts, clothes, or electronics can be sold online. You can also return unopened items for a refund.

Leverage Rewards – Consolidate reward points for cash or discounts.

Celebrate Milestones – Reward yourself with a small treat each time you reach a repayment milestone. Share these wins with supportive friends or family who can cheer you on.

These actions can help you feel empowered and motivated, reinforcing your progress along the way.

STEP 6: Prepare for the Next Holiday Season

Break the holiday debt cycle by proactively planning for next year. Dedicate a small amount each month toward holiday expenses. Reflect on your spending this year to set realistic budgets for each category: gifts, travel, dining, and décor. A few months before the holidays, review your plan and make adjustments as needed to stay on track with your financial goals. This way, you’ll be fully prepared for the upcoming holiday season.

By following these steps, you can regain control over your finances, achieve small victories, and build a sustainable plan to enjoy the holidays—without the debt hangover.

Related Articles:

1. A Humble Easter, Joy in Full Bloom, Eggs Optional

2. Budgeting for Unexpected Expenses During the Holidays:

3. Holiday Joy Without Comparison: How to Enjoy the Holidays When You’re Making Less Than Your Friends

4. Gifts for Nearly Nothing: Ten nearly-free gift ideas for the holiday season.

5. Alternatives to Traditional Holiday Parties: Ideas for hosting large parties that focus on connection, giving back, and celebrating the true spirit of the holidays.

6. Planning a Rich Holiday Feast: Holiday meals have to be rich, not expensive.

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