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Digging Out of Holiday Debt

How to Survive This Year and Plan for Next Year

By Megan L. Fowler

If paying off your holiday debt doesn't feel as though it's that important and can be handled later in the year, consider doing this: "Go to www.ConsolidatedCredit.org, and check out the debt calculator," says Howard S. Dvorkin, founder of Consolidated Credit Counseling Services, Inc. in Ft. Lauderdale, Fla. "It will show you how much of your monthly payment will go to principal versus the interest, as well as how long it will take to pay off your debts. A $1,500 debt with an 18 percent interest rate could take you over 20 years to pay off if you only send in the minimum amount due. A minimum payment during the first year would be between $27 to $30 per month, and of that, between $18 and $20 would go toward the interest, leaving little to pay off your principal."

To save a little extra money to put toward your credit bills, Dvorkin suggests not to pay extra money on your mortgage, don't eat out twice a week and don't do the daily latte. "Until you get that debt paid off, make it the priority," he says.

"The last thing you want to do is find yourself in debt again this time next year," says Chris Viale, of Cambridge Credit Counseling Corp. in Agawam, Mass. Start setting aside money now. For example, saving $15 every week throughout the year in a special savings account yields nearly $750 by the end of the year, says David Chung from CreditXpert Inc.

Want to see more?

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• Credit Ratings 101: The Importance of Knowing Your Credit Score
• Talk about it!