by Steven Gomez

Created on: January 03, 2009

As Christmas shopping makes up the majority of retail revenue in a year, it also makes up most consumer credit card debt. Many consumers spend much of the year trying to pay it off... only to run up new bills during the next holiday season, in time to begin the cycle again next year.

In managing your post-holiday debt this year, why not take steps not just to pay it off, but to make sure you don't run up another pile of debt next holiday season? There's a gift to yourself and your family that can keep on giving well after the holidays have ended.

First off, set up a plan to pay off your existing debt. The tried and true method begins with allocating a few hundred dollars devoted to paying your credit cards (which you're probably already doing anyway, assuming you've run up a few cards and are paying the minimum). Take a good long look at your budget. Map out your entire budget (using your bank statements as a reference), and find ways to save money: Cut down on going out, buy groceries (but only groceries your need: no junk food) and cook at home, eliminate pleasure shopping trips and focus on using your money for necessities. If you do this with a strict eye, you should be able to free up a few hundred dollars to pay your credit cards. Take this lump sum and set it aside every month to pay your credit cards. Also, take your credit cards and put them away somewhere. Do not use them under any circumstances until all balances are paid off, and in some cases, you will never use them again.

Now take the card with the highest interest rate and put it aside. For every other card, pay the minimum plus $5-10. You do this to keep the credit bureaus happy, as they and their credit ratings frown on bare minimum payments. Take whatever money is left over and use the lump sum to pay the highest interest card you set aside. Do this every month until the full balance is paid.

After this, take the card with the next highest interest rate and set it aside. Again, pay the minimum plus $5-10 for each one, while paying the remaining money to this high-interest card. Do not reduce the amount of money you set aside to pay credit cards after the high card is paid. The idea is that with each card that gets paid off, you can use a bigger amount of money to pay the next card down, and the next, which accelerates the process of paying your cards off.

Eventually, you will pay off all the credit cards you ran up. However, you should still continue to set aside that few hundred dollars each month, but this time, you'll set it in a savings account. Hopefully, it doesn't take you longer than 6-9 months to pay off any debt you ran up during the holidays.

The money you set aside can be used to buy gifts for the next holiday season, but it's important to try and do your shopping during the year. In talking with friends and family, listen and figure out items they may want for the next holiday season, and use your savings to periodically shop and stockpile those items at home for as low a cost as possible. When the holiday shopping season comes, retailers often mark up their prices, then give them a false "discount" to offer the appearance of a "sale". This is to take advantage of the high shopping demand. Try to procure gifts before the rush comes, and you'll save money in the long run.

And you should continue saving that few hundred dollars every month. By using the savings to buy gifts instead of credit cards, you won't need to worry about any post-holiday debt next year or any years thereafter.

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