The holiday season brings joy, but it can also leave a hefty financial hangover. From buying gifts and hosting parties to traveling, the expenses tend to accumulate quickly. According to Finder’s Consumer Sentiment Tracker, many Australians have entered the new year carrying substantial holiday debt, with some struggling to find ways to pay it off. As we navigate the aftermath, understanding how to manage these debts and avoid future financial stress is essential.
In this article, we’ll explore practical strategies to help you tackle your holiday spending hangover and regain control of your finances.
Holiday Spending Hangover
The holiday period is notorious for encouraging overspending. From buying gifts to hosting elaborate dinners and indulging in travel, the expenses can quickly pile up.
Finder’s Consumer Sentiment Tracker for December 2024 tagged 1,010 respondents from all over Australia. From that lot, there were 8 per cent – representing 1.7m people – who reportedly incurred huge debts coming into the holidays and are left perplexed on how to settle them in the new year. The national debt total was estimated at $2.7 billion, which breaks down to an average of $1,634 per head. Finder personal expert Sarah Megginson attributed the huge debt spending to frequent credit card swipes and use of Buy Now, Pay Later (BNPL) services, which also need links to credit cards.
The settlement time for the holiday debt also bears much point for consideration. The study found that amongst the 1.7 million beleaguered consumers, 43 per cent of them, or 688,000 people, are estimating they will need as long as five months to wipe out their arrears. Only 23 per cent believe they have the money to settle everything in a month. Some, however, may have a long game to play – 19 per cent calculate between six to 11 months to pay off the debt but 15 per cent believe it will take at least a year.
Strategies to Pay Off Holiday Debt
Assess Your Debt
List all outstanding debts, including credit card balances, personal loans, and buy-now-pay-later accounts. Categorise them by interest rates, minimum payments, and due dates. This will help you understand the scope of your obligations and prioritise which debts to tackle first.
Create a Realistic Budget
A well-thought-out budget is your best ally in paying off holiday debts, such as reviewing your current income stream and fixed expenses to determine how much you can allocate towards debt repayment. Some discretionary spending such as dining out, subscriptions, and entertainment may have to be sacrificed to free up additional funds.
Prioritise High-Interest Debts
Focus on clearing debts with the highest interest rates first, using the so-called avalanche method. Alternatively, if smaller debts are causing anxiety, consider the snowball method, which involves paying off the smallest balances first to build momentum and motivation.
Consolidate Your Debts
A check with your finance advisor may recommend taking up debt consolidation loans to better manage debt, especially the higher-interest ones. Consolidation loans or balance transfer credit cards allow you to combine debts into a single repayment with a lower interest rate, but you will have to fully read the terms and conditions first.
Set Up Automatic Payments
Automatic payment options can work towards the debt settlement by deducting from your nominated accounts when a due date comes – avoiding the danger of more interest from late payments. If your cash flow allows, consider making fortnightly instead of monthly payments to reduce interest accrual.
Cut Back and Redirect Savings
Some of your spending habits must be heavily modified to redirect funds towards debt repayment. For example, meal planning can reduce grocery costs, and carpooling can save on fuel.
Side Hustle
If your schedule permits, consider taking on a part-time job or freelance work. The extra income can accelerate your debt repayment timeline, reducing financial stress in the long run.
Communicate With Creditors
If you’re struggling to meet payments, consider talking about your situation with your creditors. Many providers are willing to negotiate repayment plans or temporarily reduce interest rates. Proactively communicating shows goodwill and may help you avoid defaults. However, they still need concrete guarantees and proof you have the money to pay them back.
Avoid New Debt
While you work to settle existing debts, it’s also vital to avoid accumulating new ones. Limit or stop credit card usage and postpone large purchases until your finances are under control. One idea to pursue is to possibly deactivate apps linked to the credit card with large balances, and pay the debts associated with them.
Small Wins
Debt repayment is a marathon but it doesn’t hurt to celebrate small milestones along the way, such as clearing one big debt item that has a hefty interest attached or reducing your overall debt by a certain degree.
Manage Debt with a Balanced Approach
Attempting to pay off all your holiday debts in a single month can be unrealistic and stressful, particularly if your budget is already stretched. Spreading repayments over six months to a year allows you to balance debt reduction with other financial obligations, such as rent, utilities, and everyday living expenses. This approach minimises the likelihood of defaulting and helps build better financial habits for the future.
Structured Repayment Plan
The psychological burden of debt can be immense, leading to stress, anxiety, and even strained relationships. Having a structured repayment plan provides clarity and a sense of control by focusing from the daunting size of the debt to actionable steps you can take to reduce it. Over time, watching your balances decrease can bring a sense of accomplishment and financial empowerment.
Avoiding Future Holiday Debt
As you work to pay off the recent holiday debts, consider strategies to avoid similar situations in the future. The objective is to look forward to spending the holidays without financial repercussions, even if they are still far below the horizon.
- Set a Holiday Budget – Determine how much you can afford to spend during the festive season and stick to it.
- Save in Advance – Open a dedicated savings account for holiday expenses and contribute regularly throughout the year.
- Shop Smart – Look for discounts, sales, and loyalty rewards to reduce costs on gifts and essentials.
- Limit Credit Usage – Use debit cards or cash to avoid overspending.
Conclusion
Some finance specialists advise their clients to “don’t put Christmas on a credit card” – and that maxim may even be truer than you think!
Paying off holiday debts in 2025 doesn’t have to be overwhelming. The key lies in assessing your situation, creating a realistic plan, and staying disciplined. As you work towards financial freedom, you’ll also build habits that safeguard your finances for the years to come.
DISCLAIMER: This article is for informational purposes only and is not meant to replace official finance advice. The data presented is based on the latest information available at the time of writing. 2 Ezi is not related to any consumer comparisons service.
If you or a loved one are experiencing distress from credit-card related finance issues, please contact the National Debt Helpline at 1800 007 007.
