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7 steps to conquer holiday debt

By Andrew Housser

Welcome to the New Year! For many people, the yearly ritual of turning to a new page on the calendar comes with an accompanying dread: That of opening their latest credit card statements and seeing just how much they owe after the holidays.

If you overspent during the holidays and now have credit card debt that you must repay, you are not alone. Last year, according to a consumer survey, 13.6 million Americans were still paying off the previous year's holiday bills -- in October!

Fortunately, you can make a plan now to tackle your holiday debt. Additionally, you can take action to put yourself in a better place in 2012 to avoid facing this same problem year after year. Try these steps to take control of your holiday debt:

1) Find what you spent.

Gather all your credit and debit card statements for December (and earlier if they include holiday shopping). Add up the total amount that you spent on the holidays.

2) Know what you owe.

Next, add up the amount you still owe for the holidays.

3) Make a plan to repay your holiday debt.

Some people find it useful to separate the holiday debt from other debts and pay it off specifically. Set a goal to pay these bills off in a set number of months. If you owe $1,000 in holiday bills, you could pay it off in about three months if you can pay $300 per month. If you can afford to pay $200 per month, you could repay it in five months.

4) Find a way to make the extra payments.

Do what you need to do to make the additional payments. Do not take away from what you are already paying on other debt and bills. Take on extra work or a side job, sell unneeded items, or trim your expenses to come up with the payments.

5) Consider a balance transfer if you have good credit.

If you cannot pay off your debt in just a few months, and you have good credit, you might be able to transfer the balance to a different credit card. This can be a sensible option if you qualify for a low- or no-interest balance transfer offer. Most credit cards have an annual interest rate of around 15 percent. A balance transfer usually has a fee of 3 percent to 5 percent of the balance. If you are eligible, and you must pay for more than six months, you might find it worthwhile to transfer the balance. There is a catch: You must not charge anything on the credit account if you wish to pay it off quickly and get out of debt. Also, if you do not repay the balance by the time the promotional interest rate expires, you might have to pay interest on the whole amount, so be sure you are serious about repaying the debt.

6) Get help if you cannot repay your debt.

If your debt is in the thousands of dollars, and you cannot afford your payments, consider seeking help. Depending on your individual situation, you might benefit from a debt management plan, or from debt relief help from a consumer credit advocate. For those in serious debt situations for whom debt management/debt relief services cannot be of help, bankruptcy may be the right solution. Be sure to discuss with a bankruptcy attorney licensed in your state.

7) Save when you have finished repaying.

After you pay off the last of your holiday debt, take what you have been paying, and funnel the amount into a dedicated holiday savings account. If you save this money for the rest of the year, by the time the holidays roll around again, you may have accumulated as much as you borrowed last year. The result: no 2012 holiday debt.

Dealing with holiday debt can be a painful way to start the year, but it is possible to find your way out before you need to begin planning for the next holidays. Come up with a plan to not only pay off your debt, but also to save for next year's holidays -- that will be a true financial gift to you and your family.