Christmas season is done and many have to face a grim financial reality – debt! An average American incurs more than $1k debt after Christma. If this is you, then you need to read my Wealth-Tip on How to Pay Off Your Christmas Credit Card Debt Quick
A survey that was done by MagnifyMoney.com says, “Americans Racked up $1325 in Holiday Debt in 2019”. Sadly, the majority of the respondent admits that it will take them more than one month to pay off their Christmas debt.
Christmas Debt Facts
44% of consumers took on debt this holiday season
78% of those with holiday debt won’t be able to pay it off come January
58% of indebted consumers are stressed about their holiday debt
70% of those with holiday debt owe money on their credit card
40% plan to consolidate debt and/or shop arround for a good balance transfer interest rateMagnify Money
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4 Simple Steps You Need to Do to Pay Off Your Christmas Credit Card Debt in Less than 3 Months
Step 1: Assess the Damage
The first step in solving ANY problem is knowing what the problem is. This is is also true when you want to pay off your credit card debt quick. You need to know how much you owe so you can formulate a plan on how to pay it.
I can’t back this with some smart “research” studies, but, based on personal experience, my spending habits changes when I am aware that I am in debt. I naturally cut on my discretionary spending if I know I am in the red. This is why I believe knowing how much your credit card debt is important.
Step 2: Create a SMART Goal
The next good step to take after determining the problem is to create a goal. To increase your success, it would be best if you will create a SMART goal.
S.M.A.R.T. is an acronym for Specific, Measurable, Attainable, Realistic, Timely. In other words, to create a SMART goal, you need to make it specific, measurable, attainable, realistic, and timely.
Defining S.M.A.R.T Goals
Specific – Goals should accurately describe what you want to accomplish in a given period and after performing a specific action. To help you come up with a specific goal, simply ask the five W: what, why, who, where and which.
Measurable – Goals should be quantitative. In other words, there should be a way to measure progress. Measurable goals should be able to answer how much or how many and it should be able to tell you how much you have accomplished.
Achievable – Goals should be realistic and attainable. It shouldn’t be easy because you will take it for granted thus not completing it. It shouldn’t be impossible to do either because it will force you to quit. Make it challenging but doable. Set goal that makes you step out of your comfort zone.
Relevant – Goals should affect you and it should contribute to your overall life goal. Making goal personal means it would help you take ownership. Taking ownership would improve your success rate because it will help you persevere when things get hard.
Time-bound – Goals should have deadlines. Deadlines are important because it will force you to take action to accomplish goals before the time expires. In addition, placing a deadline would help combat procrastination. Finally, time allocation to accomplish a goal means you can keep the momentum, the key to achieving a goal, going
Example of a S.M.A.R.T. goal
“To pay off my $1325 Christmas credit debt on April 30 by creating a budget and cut on my top 3 discretionary expenses”
Specific: In the SMART goal example above, it is specifically said what needs to be accomplished (paying off the $1325 debt), which debt needs to be paid (Christmas credit card debt), when the debt is going to be paid off (April 30), and how it is going to be paid (create a budget and cut on the top 3 discretionary expenses).
Measurable: The given goal is measurable because it states how much Christmas credit card debt, $1325, must be paid off. That said, you can measure the progress of this goal by checking if the amount of $441 per month or $220 per bi-weekly paycheque is being paid. If not, then it is a sign that the goal is not being met.
Attainable: In the example above, paying $441 a month or $220 bi-weekly might be easy to some, challenging to few or impossible to many. The key here is not the numbers, rather how realistic and how challenging it would be.
If you learned that paying $441 a month is impossible to be done even after cutting every discretionary spending you have, then feel free to lower the target amount. Likewise, if you found out that you have extra money left after paying all your essential expenses, then I urge you to increase your monthly payment.
Relevant: You’ve read this far so I am assuming that paying off a Christmas credit card debt is something relevant to you. If not, then make sure to modify the goal so it would be something that benefits you. For example, you could say,
“To pay off my $1325 Christmas credit debt on April 30 by creating a budget and cut on my top 3 discretionary expenses so I can improve my relationship with my spouse”
“To pay off my $1325 Christmas credit debt on April 30 by creating a budget and cut on my top 3 discretionary expenses so I can get qualified for a mortgage”
Timely: In our example, 3 months is the time we are giving to ourselves to finish it! The deadline can be extended or shortened for a couple of months if needed to make the goal attainable. It is important to set the deadline way before December to give you time to save for the next Christmas season and to make sure the debt will not pile up.
Post Your SMART Goal
After you made a SMART goal for yourself, be sure to post it somewhere you can see often. I would even suggest to post it where you will see it first thing in the morning, so you will be reminded by your goal at the beginning and throughout the day.
Step 3: Create a Budget
Creating a SMART goal without executing it is like finding the perfect partner but would not take it to the next level because you don’t want the responsibility.
Once you set up your Christmas-credit-card-debt-related-SMART goal, then you must commit and there is no other way to do this but to create and follow a budget.
A step-by-step guide on how to create a budget will not be thoroughly discussed here because it is another big topic to discuss. However, please consider reading my How to Budget and Save Money if you need help with creating a budget.
For now, let me give you a quick guide on how you can create a budget.
- Know how much you make each month (after taxes)
- List down all of your expenses
- Categorize your expenses into essential or discretionary expense
- Subtract “Total Expense” from “Total Income”
- Allocate money to Christmas credit card debt if you have extra money
- Review and eliminate some or all discretionary expenses if money is not enough
- Consider doing overtime or temporarily take extra jobs to increase income
Step 4: Automate Your Payment
The last step you can do to pay off your Christmas credit card quick is to automate your payment. Automating your payment would be beneficial because a portion of your income will automatically be deducted and your debt will be paid without you even noticing it. This means you will not have a chance to think twice whether you will use your income to buy more things vs. pay off your debt; it will automatically go to your debt.
In order to do this step, you would need to log in to your online banking and set up the automatic transfer from your checking account to your credit card account. Make sure to transfer an amount a day after your payday. Of course, the amount will be equal to what you determined in your SMART goal.
If you do not have an online bank, then go to your bank branch and request a teller to set up an automatic from your checking account to your credit card account on a specified day. Again, the day should be a day after your payday and the amount should be equal to your SMART goal.
Bonus: Side Hustle Opportunities
If you did step 1 to 4 but it is still not enough to pay off your debt on time, then my advice is for you to make more money. There are lots of side hustles you can do nowadays, and it’s never been easy to start one because of the internet.
One of the most popular ways to make money online is through blogging.
Bloggers can monetize their blogs in different ways. The most common is through affiliate marketing or through Adsense.
If you don’t know how to blog but determined to make extra money, then I suggest that you subscribe to Wealthy Affiliate.
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