Dear Chuck,

The bills have arrived and reality has hit. We splurged at Christmas and failed to keep track of everything we bought. We know now! Can you share some tips on paying off holiday debt and how to avoid ever doing this again?

Pay! Pal

Dear Pay! Pal,

It is easy to get caught up in the spirit of giving and take advantage of easy credit. In the joy of the season, many people completely forget that bills will eventually arrive. That can be painful, especially when spouses don’t communicate about finances.

You’re one of many Americans with Christmas debt. MasterCard Spending Pulse reported that U.S. sales climbed 5% between November 1 and December 24 compared to last year. U.S. consumers spent more than $850 billion this holiday and used more credit than previous years. The amount of interest some people pay on borrowed money is the largest expense in their budget and the biggest source of financial stress.  

For believers, this is an opportunity to learn to trust God like never before. With dedication and determination, you can pay off your debt and avoid the “plague” of Christmas debt next year.

In a private journal between you and God, write down the total amount of money you owe. Describe your circumstances in detail, expressing all of your fears, worries, and doubts. Communicate your willingness to trust Him, your need for faith to trust Him more and for strength to responsibly pay off the debt.

Psalm 37 tells us to trust in the Lord, to delight in Him and to commit our way to Him. Pray in eager anticipation of what He will do as you humbly bring your requests before Him. Resolve to agree with Habakkuk, I will rejoice in the Lord; I will take joy in the God of my salvation. (Habakkuk 3:18) Knowing He is with you, in and through this, is reason alone to rejoice!

Not let me give you the practical, strategic method to get rid of this debt and stay out of it for good.

Step One – Cut Your Expenses

• Consider moving to lower your rent or mortgage
• Cook instead of eating out, pack your lunch, make coffee at home
• Reduce energy consumption for lower bills
• Drive less or carpool
• Cancel cable and any unnecessary memberships/subscriptions
• Limit exposure to social media, television, magazines – anything that causes temptation
• Make a budget and review with your spouse every pay period
• Use cash only to avoid overspending
• Do NOT accumulate any new debt

Step Two – Increase Your Income

• Pick up a part-time job
• Sell household items, clothing, decor, toys, etc.
• Negotiate a raise
• Do your taxes and apply your refund to reduce your debt

Step Three – Use the Debt Snowball Method

This is a method that keeps you motivated. If you carry balances on several credit cards and any additional debt, this may work for you.

List all your consumer debts – everything except your mortgage, from smallest to largest. Make minimum payments on all your debts, but put any and all extra money towards the smallest debt. Once you pay off the smallest one, apply the freed-up payment to the next largest balance, and so on until all loans are paid off. By starting with the smallest debt, the hope is that you’ll be able to pay it off quickly and find encouragement to continue down your list.

We have a free calculator you can use to create a payoff plan (no math required!). Our 5 Steps to Debt-Free Living Mini Video series is also a great resource if you want to understand more.

The drawback to this method is that your highest interest rates may be your largest debt and accumulating during this period. If so, the next method may be your best choice.

Optional Plan – Use the Debt Avalanche Method

Instead of starting with the smallest debt and working up to the largest, this method has you organize your debts from the highest interest rate to the lowest and attack the loan with the highest rate first.

Just like the snowball method, continue to make minimum payments on all other debts and rollover what you were putting towards the first debt until they are completely paid off. This method saves you money in interest.

Step Four – Deepen Your Understanding

Debt is a symptom of a deeper issue. If you just pay off your bills without addressing the cause, you’ll end up back in the same place in a few months or years. I’d encourage you to enroll in a Crown study, like this one. You will gain knowledge, accountability, and encouragement.

Another great resource, especially if you’re struggling with overwhelming credit card debt, is Christian Credit Counselors. They specialize in credit card debt and have helped many families get out of debt.

Step Five – Prepare Now for Next Christmas

• Save and pay cash
• Make a spending plan to simplify decisions and meet priorities
• Make a tradition of drawing family names to give a gift instead of buying for everyone
• Plan your holiday meals, shop sales and cook ahead
• Plan experiences; they last longer than gifts

Our gift giving was held in check this year by drawing names on a website called Draw Names – a Secret Santa generator. We set a price limit and had a great time focusing on one person. But gifts were only a small part of our Christmas. We cooked and did dishes together, played games, told stories, laughed, and prayed blessings over our family.

Ask Him to give you the focus and self-control you need. You have 11 months to be disciplined and prepare for a debt-free Christmas in 2019. If you can only make small monthly payments, do it. God can multiply your efforts. Consistent small steps, hard work and sacrifice will lead you to your final destination and put in motion new habits that will impact you for a lifetime.

You will learn from this and be used to help others. When you’re no longer a slave to your lender (Proverbs 22:7), you won’t ever have to wonder how you’re going to pay, pal!

Originally posted on the Christian Post, January 25, 2019