How to get out of holiday debt, according to an MSU Denver accounting professor
The holidays have come and gone, and while they can bring joy, they're also expensive. The tiniest of costs add up quickly. Data from LendingTree shows that 34% of Americans went into debt last holiday season with an average of $1,028.
Robert Persichitte, affiliate professor of accounting at Metropolitan State University of Denver, says it can be blindsiding. But there are several easy ways you can begin to tackle that debt.
"First, look at the credit card statement. That's usually the first thing for me, it comes in and there's usually a surprise of, 'I spent how much?' And it's really easy to miss those seemingly small purchases," said Persichitte. "I have a lot of cousins, $40, $50 here for gifts for each of them, that adds up. Figure out where you are; how much do you owe and how much do you have to pay."
Then, get a big-picture plan. That can include:
- A debt consolidation loan
- Cutting your spending
- Tackling higher interest debt first. Not only does this reduce the total amount of interest you accrue, but it also helps you get out of debt faster.
- Taking out a 401(k) loan to assist with payments. You may be able to borrow up to $50,000 from your 401(k) if you have been contributing to one through your job.
- Coming up with additional cash inflow
And, above all, stay focused on your goal.
"The biggest mistake I see – is that it's resolution season, you start living it and you start feeling it. You see that bigger paycheck and your first thought is, I deserve to treat myself. I deserve a spa day. I deserve to buy something that I want. Our ability to make good financial choices works like a muscle. It's our willpower. It gets tired if you use it too much, and it gets stronger if you use it repeatedly over time. So, try your best to avoid temptation, put those blinders on until you have that debt paid off."
"Start with two strategies and evaluate which is going to be better for you. And once you compare the two, it's going to become clear: one's a good option and one's a bad option. Always compare two of your options until you have agreement," he added.
