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Digging Out of Holiday Debt

How to Survive This Year and Plan for Next Year

By Megan L. Fowler

Santa has come and gone, your kids think you're the greatest parent in the world and your bank has called twice reminding you of your unusually high credit card balance. The new year is here, and it's brought along its usual bundle of unrealistic resolutions, a few extra pounds around your waist and credit debt you acquire during the holidays and then spend six months each year resolving. This year can be different, and you can easily win in the catch-up credit game and start off your new year – and years to come – on the right foot.

Procrastination is not something you want to even consider right about now, especially since your credit cards are maxed out. "If you choose to ignore those bills in the 'bill drawer,' untold dust begins to pile up and so it's best to get all the bills out into the light of day as soon as possible," says Dave Ramsey, a Nashville, Tenn., author of several finance books. "Even though Christmas is over, make a list and check it twice. Simply listing and totaling the damage makes fear slip away." In other words, he says, by listing everything you owe, you'll see the debt can be resolved. "Now do the dreaded 'B' word – a budget," he says.

Getting your family on a budget is absolutely the next step, according to Mike Croxson, president of Amerix Corp. in Columbia, Md. After listing all of your credit cards, their balances and their interest rates, launch a payback plan, he says. "Focus on paying off cards with the highest interest rates first, then focus on paying off cards with the highest balances," Croxson says. "Consider transferring balances to lower-rate cards as long as you understand all of the card's terms."

Also, "Don't ignore the other balances," he says. "Funnel a larger-than-minimum payment to the largest balances and send the minimum payment to the cards with lower balances. When you pay off the big bills, you should begin adding more to the minimum payments you were making on the smaller bills." This can all become confusing, so don't be afraid to ask a financial consultant for help.

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