Paying off holiday debt in 120 days or less

Learn how to recover from holiday debt with this four-month plan.

While the hustle and bustle of the holiday season may be over, post-holiday debt is the gift that keeps on giving. If you charged your holiday expenses to a credit card, you could easily be stuck reminiscing over your purchases for months—or years—to come.

To avoid prolonging holiday debt stress, focus on paying your bills off at the start of the year. By going on a spending fast—or a holiday debt diet—you can eat away at your post-holiday debt and move on with your life without stress.

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 ‘Tis the season for giving… and spending: How to pay off holiday debt in four months

Holiday gifts may be the expense on your mind, but add in holiday travel, seasonal entertainment, and the cost of decorating your home, and your holiday bill can surge. It’s a huge chunk of change by all accounts, but it’s not an insurmountable amount to pay off in four months.

If you’re ready to pay off your holiday debt for good, consider this monthly timeline that can leave you free of post-holiday debt by early May—just in time for the spring flowers to bloom. Here’s how to recover from holiday debt:

A graphic of a spiral notebook depicting a to-do list with check marks next to the line items. Also featured is a calculator, a coffee cup, and a pen.

Month one: Get started

Before you can tackle any problem (paying off holiday debt is no different) you must take stock of the situation. In this case, it’s how much you owe. Start by tallying up each of your holiday debt balances including credit card bills, balances owed on store cards, and loans from family or friends.

Once you have your total debt amount, divide that figure by four to determine how much you need to pay monthly over the next 120 days.

Month one to-do list:

  • Determine how easily you can afford to pay one-fourth of your holiday debt each month for the next four months. Can you pay “extra” on your bills without breaking a sweat, or will sacrifice be required?
  • Look for small tweaks to your budget. Take a break from cable, buy only what you need at the grocery store, go on a “spending freeze” or find other frugal living hacks to free up some cash.
  • Break down your debt by week. If you owe $1,200 total and one-fourth of your balance is $300, you’re talking about earning or saving about $75 extra per week.
  • Press pause on your credit card. It can be trickier to pay down existing debt when you’re adding new debt to the pile.
  • Come up with one-fourth of your holiday debt load by month’s end, and spread your cash across each holiday bill.

Month two: Ramp up your savings

The pain of paying off holiday debt so quickly might have you on edge. If that’s the case, finding ways to earn more while reducing spending could help. Picking up a part-time job or more hours with your current employer can make your journey out of debt easier.

Month two to-do list:

  • Consider side hustles you can do while working full time that can help you earn more (think seasonal work, a side gig, or offering to babysit for friends or family).
  • Search for ways to reduce your monthly spending. Experiment with less expensive meal options, get creative with the ingredients in your pantry, and avoid online shopping like the plague.
  • Deposit your extra funds in a targeted savings account kept separate from your regular checking account. By moving that money “out of sight, out of mind,” you won’t be tempted to spend it.
  • Use your additional earnings (and uncovered savings) to pay one-fourth of your original debt balance.

To avoid prolonging holiday debt stress, focus on paying your bills off at the start of the year.

Month three: Stay the course

By the time your third month hits, your holiday debt should be half gone. Congrats are in order, but don’t celebrate too hard. If you want to emerge debt-free, you must stay the course.

Continue saving more and spending less as you finish out your holiday debt diet. Try not to slack off as you near the goal; keep moving forward, and keep saving as much as you can.

Month three to-do list:

  • Continue boosting your savings and keeping your spending at a minimum. Remember that every dollar you can throw toward debt now is another dollar you won’t have to pay back later.
  • Avoid using credit cards to solve budget shortfalls. Try out the envelope system if you need extra motivation.
  • Come up with the funds to make your third holiday debt payment by the end of the month, and spread it across your holiday bills.

Month four: Pay off holiday debt for good

As month four approaches, only a quarter of your original holiday debt should remain. Now is the time to really buckle down and pay off that post-holiday debt. Continue your reduced spending plan as long as you can, and avoid falling back into old, costly habits. The finish line is in sight.

Month four to-do list:

  • Free up extra cash to put toward your debt. Consider cleaning out your closet and selling any clothes or household items you no longer need.
  • Come up with the final portion of your original debt balance by the end of the month. Spread your payment across each remaining credit card balance until they’re gone.
  • Rejoice in the fact you’re free of post-holiday debt.

A man sitting at a desk writing something on a piece of paper looks up at a woman holding a coffee cup and smiles.

Plan a debt-free holiday next year

After four months of hard work, you should be free of holiday debt and the burdens that come with it. What now, you ask?

If you want to avoid holiday debt next year, it’s best to start planning now. Using last year’s holiday spending as a baseline, start building a holiday savings cushion right away. If you have five months left to save $1,200 for next year’s holidays, for example, start saving $240 per month in a savings account ($1,200/5 months = $240). That’s about $60 per week.

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Discover Bank, Member FDIC

When you’re ready to start paying for next holiday season’s expenses, consider using a rewards checking account for your purchases. With Discover® Cashback Debit, for example, you can earn 1% cash back on up to $3,000 in debit card purchases each month.1 Use your cash back to avoid going into holiday debt, or if your holiday spending plan is on track, move your cashback bonus to savings to start working on your financial resolutions.

If you plan early and consider your payment method, you won’t have to pay off another round of holiday debt next year.

Making a holiday budget can go a long way toward keeping you out of debt. Learn how to keep your holiday spending in check with a thoughtful plan. 

1 See Deposit Account Agreement for details on transaction eligibility, limitations, and terms.

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