How to recover from your holiday-spending hangover in the New Year

Among those who took on debt this holiday season, 65% say they weren’t planning on it, the survey found. And nearly a quarter of holiday debtors said it may take them more than five months to pay it off.  In other words, they may still be paying for Christmas by the time Memorial Day weekend comes around.

But there are a few simple ways to get your finances back on track. Here are some tips from personal finance experts. 

1. Don’t beat yourself up. 

Overspending during the holiday season is a common misstep — and a completely understandable one, said Julie Penwell, a certified financial planner and assistant vice president at Wealthspire Advisors in Seattle.

“Give yourself grace!” she wrote in an email to MarketWatch. “It’s really common to overspend during the holiday season, and creating a shameful mindset around it may not be all too helpful as you look ahead.” 

Matt Schulz, chief credit analyst at LendingTree, noted that most of us only have good intentions when we shell out more than we can afford. 

“We see a lot of debt around the holidays in part because people want to be generous,” Schulz said. “They want to give nice gifts, they want to take trips to see family and friends they haven’t seen in a while. They want to make memories they’ll remember for a long time. [But] that adds up to a lot of money spent.” 

But going a little over budget doesn’t have to be the end of the world, he said.

“Holiday debt can be a sign of confidence,” Schulz said. “If you feel good about your financial situation, you may not be concerned about a couple months of debt and a little bit of interest.

If somebody is going into a little bit of debt to take their kids across the country to spend the holidays with your grandparents, they shouldn’t feel bad about that sort of thing,” he added. “It’s where you end up with spending that’s going off the rails — through impulse buys, carelessness, that sort of thing — where you’re in a little more trouble.”

2. Make a plan to pay off any high-interest debt

The next step is figuring out how you’ll quickly pay off any debt you may have accrued during the holidays.

A little bit of holiday debt isn’t too much of a concern — especially if you can make a plan to pay it off in a couple of months, Schulz said. 

But leaving that balance untouched could quickly turn into a bigger problem as high interest rates compound the amount you owe.  

One trick to consider is transferring the balance to a card with an introductory offer of 0% interest for a certain period of time, said Charles Pastor, a certified financial planner based in Fort Collins, Colorado and contributing expert for The Motley Fool Ascent.

“With credit card interest that can rack up quickly, a balance transfer card can offer much needed breathing room to get your finances in order before tackling debt,” he wrote in an email. 

Using a balance transfer card can buy you some time to chip away at (and hopefully pay off) holiday debt interest-free, he said. But be sure to pay your balance down before the introductory offer expires or you’ll be hit with high interest charges again.

“When using a balance transfer credit card, strategy is everything,” he wrote.

3. Rework your budget for 2024

After you make a plan to pay off any high-interest debt, it’s a good idea to reassess your budget for the year ahead, Penwell said — and reflecting on what drove you to overspend during the holidays could provide some valuable insight. 

“When we stray from our budget, it’s important to look at the facts — what happened and why? Then, give yourself the space to process these facts — how do you feel about overspending? What drove this? What do you wish you would have done differently — and be specific!” she wrote. “Telling yourself, ‘I wish I wouldn’t have spent as much’ does not provide a lot of room for change.”

Making a financial plan for 2024 could include setting aside some money for next year’s holiday spending.

“I’m a big fan of automation — making a good decision once and having it repeat every month or every pay day,” said Ted Rossman, a senior industry analyst at Bankrate. 

For example, setting aside $100 each month leading up to the holidays leaves with $1,000 to defray next year’s travel and gift-shopping expenses.. 

Penwell also vouched for the perks of a holiday fund.

“You may not fund all of your 2024 gifts from this bucket,” she wrote. “But at least you will have a dedicated pool of funds for gifting rather than needing to dip into your other savings accounts.” 

When in doubt, sticking to a budget and building gradual savings are always a good idea, said Pastor, the Colorado-based financial planner. Focusing on those principles in the new year could mean a less stressful holiday season in 2024.  

“After all,” Pastor wrote, “No one wants to be haunted by the ghost of Christmas spending past.