How do I recover financially after Christmas?
Face the total, deal with the most expensive debt first, and set up the thing that prevents next January.
- Difficulty
- beginner
- Time
- 45 min
- Read
- 2 min
- Safety
- caution
Short answer
Add up the actual total before doing anything else — the avoidance is worse than the number. Then pay down the most expensive borrowing first, and set up a small monthly amount for next Christmas.
January is when the cost of December becomes concrete. The useful response is arithmetic rather than resolution: knowing the total, ordering the debts, and removing the cause for next year.
Safety
Step by step
- Add it all up.Every card, every buy-now-pay-later arrangement, every overdraft. The total is usually less frightening than the vagueness, and nothing can be planned without it.
- List each debt with its interest rate.Rates vary enormously — a store card can be several times a credit card. The rate, not the balance, decides which to clear first.
- Pay minimums on everything, then overpay the most expensive.The arithmetically fastest route out. Clearing the highest-rate debt first costs least overall, even when it is not the largest.
- Check the buy-now-pay-later deadlines.The ones with a deferred interest period become expensive abruptly. Diarise every deadline — these are the ones people miss.
- Check whether a balance transfer helps.Moving high-interest debt to a lower rate can save a great deal, if you can get one and will clear it within the period. Check the transfer fee and what the rate becomes afterwards.
- Cut the January costs, not the whole year.One expensive month is easier to recover from with a few weeks of restraint than with a year of it. Pause subscriptions, defer non-urgent purchases, eat from the freezer.
- Talk to anyone you owe if it is unmanageable.Creditors have far more flexibility before payments are missed. Free debt advice from an established charity is genuinely useful and costs nothing.
- Set up next year now.The step that actually prevents a repeat. A standing order into a separate account from January — a modest monthly amount covers a Christmas by December.
Tips
- Do the addition on a specific day rather than gradually. Uncertainty about the total is more stressful than the total.
- Write down what was actually worth it and what was not. It is the most useful record you can have next November.
- Buy-now-pay-later is still borrowing, and increasingly appears on credit files. Include it in the total.
Questions people ask
Which debt should I pay off first?
The one with the highest interest rate, while paying minimums on the rest. That is arithmetically the fastest and cheapest route, even if it is not the largest balance.
How do I avoid this next year?
A standing order into a separate account from January. A modest monthly amount covers Christmas by December and removes the borrowing entirely.