Pay Off Debt

How To Recover From Overspending This Christmas!

Did Christmas bust your budget
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Ho, Ho, Holy shit!  Has Christmas shopping totally destroyed your budget?  For years and years, my wife and I would set a “limit” on our Christmas spending.

I put “limit” in quotes because neither one of us paid any attention to it.  I’d become obsessed with buying every possible item I thought she’d like.

I didn’t do this to impress her, I did it because I love her and I wanted her to have an awesome Christmas.

Fast forward to December 26th and we were left with this financial hangover.  The pain would creep up our necks and soon it felt like someone had smacked us in the temple with a hammer.

This type of hangover isn’t cured with some Tylenol and hydration… No, no.  This hangover lasts for months and is only cured by one thing… MONEY.

We’d spend the better part of the next year repaying the credit card bills we racked up in the name of holiday spirit.  Delaying our financial goals and burying our home in debt.

This cycle was the definition of insanity.  We’d dream up debt free goals, pay off our credit cards, over load our credit cards with Christmas gifts, and dream up debt free goals again.

We weren’t making any long term progress.  It was financial yo-yo dieting.

If you’ve found yourself in a similar situation, fear not!  You can break the cycle, but first… You have to recover from the budget you just busted.

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Assess the Christmas Damage

Christmas gifts

Much like a parent checking the baby’s diaper, you need to take a look at those credit card/bank statements.

Sure, you’re most likely going to find a big turd waiting for you but you gotta clean it up before it stinks up the whole house.

Hold your breath and sign in… Don’t worry about what you’re going to find.  The damage is done, and we can talk about reversing that damage here in a minute.

Open up an excel file, or simple word document and list the damage out.  Smallest balance to greatest.  This order will be important as we move on.

Whatever you do, don’t be embarrassed by this.  Everyone makes mistakes, and over spending around the holidays happens A LOT.

We did it for YEARS.  The priority is finding out exactly how much you spent.  Once you have a number, we can build a plan!

Don’t Freak Out!

Alright.  This is important.  The damage is done.  Beating yourself up over this won’t help.  If anything, it’ll make you feel even worse and can lead to some other poor emotional spending.

You can get out of this mess, I know because I’ve been there… many times!

Emotional spending works both ways.  We buy things to make others happy (Christmas/Holidays), and we buy things to make ourselves happy (emotional spending).

Both can break the bank and both should be avoided.  So, don’t get in a rut and think all hope is lost.  It isn’t.

It’s important that the bleeding stops though, and cutting yourself a break will help you move on from the gross feeling that follows overspending.

Feeling better?  Good, let’s move on and clean this up.

Prioritize and Plan

Christmas tree and gifts

Now that you’ve got your debt listed out from least to greatest, it’s time to figure out where to start.  You’re plan is going to depend on how much debt you’re dealing with.

There are two main schools of thought when dealing with debt.  The debt snowball and the debt avalanche.

The debt snowball is paying off your debt in order of the lowest balance to the highest balance.  You’ll pay minimum payments on all debts except the account you’re currently trying to rapidly pay off.

Once you pay off debt #1, you roll right into debt #2.  You’re going to bring that payment from debt #1 and “snowball” that into the minimum payment of debt #2.

You’ll continue this until you’re debt free.

The other option is the debt avalanche.  This is similar to the snowball method, but you’re going to list your debts out in order of interest rates.

You’ll list them from the highest rate to the lowest, and you’ll pay them off in that order as well.  The balance isn’t a priority, you’re going to pay the debt off as fast as possible to avoid paying all of that nasty interest.

The concept of rolling the payments still applies.  Once you pay off that first debt, you’ll roll the payment onto the next.

If you’ve racked up a lot of debt and a high interest rate, you should consider the avalanche.  You don’t want to end up paying hundreds of dollars in interest if you can avoid it.

If you’re looking at a manageable total, and can pay if off quickly, I’d suggest the snowball.  Personally, I’m a fan of this method because it helped us pay off $109,000.

Whichever method you choose, make sure it feels right because you’ve got to stick with it.

Budgeting 101

man screaming

I think everyone should create and stick to a budget, whether that’s a monthly budget or a budget based around pay periods.

There is a lot of accountability that follows tracking your spending on a daily basis.  It worked wonders for us, and even though we’re now debt free, we still budget every 2 weeks.

The budget is the back bone to getting this holiday cheer paid off.

I have a free budgeting excel tool available after you subscribe!  It’s super easy to use, and it’s free.  Win, win!

Plug in your income, your expenses, and whatever is left over is headed toward this new debt.  This is called a $0 based budget.

That means you’re going to budget your account to $0 every month, or pay period.  Now, I say $0… but I don’t mean it.  I never liked the thought of only have $10 left in our account at any time.

So, we always left $100 in our checking account and just pretend it wasn’t there.  We’d budget to $0, but $0 was actually $100.

It’s a small security blanket, but it kept us comfortable.

Creating this budget and tracking your expenses will do two things.

One, it will keep your spending in check because you’re going to have to track and document it.  Two, it will show you that you actually have more money than you thought each month.

If you currently aren’t budgeting, you’ll be shocked at how much money you’re leaking out each month.  This newly found “extra” money will make your debt pay off that much easier.

So much winning!

Worst Case Scenario

If the damage is detrimental to your financial or personal health, you should consider what to do in the worst case scenario.

If the payments are impossible and you can’t figure out a way to pay for all of this shi… stuff.  Then there is an option.

Sell it or return it!

This is probably the least attractive option, but it will quickly clean up this mess.

Most retail stores have return policies, and if not, there are a ton of ways to sell your unwanted items.

Facebook Market Place, Let It Go, Craigslist… The list probably goes on, but the point is, you can get out from under this debt really fast by stepping up and correcting the action.

Your loved one will understand if you return some gifts.  They won’t hate you, and you’ll probably be better company if you’re not dwelling on your financial woes.

Long Term Plan

did you overspend this christmas
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Christmas is a tough time for us adults.  Gifts are expensive and there is a certain expectation on us that tends to lead to poor financial decisions.

I’ve been in your shoes, I’ve over spent on Christmas and felt terrible about it for months after.  Don’t do what I did and beat yourself up over this.  Use this misstep as a learning opportunity for the future.

Look ahead at 2019 and vow to not dig this hole again.  You’re financial success will explode if you start each year above ground.

Talk to your family and friends.  Be honest with them about your financial goals.  Talking about money shouldn’t be taboo and by removing the stigma, you’re going to make it easier to not break the budget next year.

We told our families that we didn’t want any gifts, and would rather just have their company.  Some took it better than others, but the overwhelming message is that gifts are arbitrary and love is all that matters.

My wife and I aren’t buying gifts for each other for the first time, and it does feel strange… but, we are going to start in a strong financial place kicking off 2019.

I’m really excited about that, and I want that for you too.

Please let me know if I can offer any additional advice or support while you’re paying off your debt.  Subscribe for a free budgeting tool and don’t forget to pin this post!

Let us know in the comments how your holiday was and if you stayed under budget!

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