The holidays are long gone, but for many graduate and adult students, the financial stress left behind is alive and well. Of Americans who felt the pressure over the holiday season, 32% said holiday finances were their greatest source of stress, according to a Country Financial survey.
Holiday debt is real, and it can majorly cripple a student’s spring break plans. But there’s still time to get your debt under control so you can afford to have fun this spring break.
Consolidate your debt with a balance transfer card
One of the quickest ways to kick holiday debt is to consolidate stray balances into a single new account. Instead of having multiple minimum payments due at different times throughout the month, you’ll have just one bill. But what really makes debt consolidation a winner is when you can score a lower interest rate in the process.
Consolidating with a balance transfer credit card can be a game changer. Many offer low- or no-interest introductory periods that can sometimes span years. If you qualify, you can transfer your balances onto this new card and effectively eliminate the interest. Doing this could seriously accelerate your debt payoff timeline, assuming you don’t make any new expensive charges and you pay everything off before that promotional period ends.
What to be aware of
While all of these benefits are great, keep in mind that these cards typically charge a balance transfer fee, often reaching up to 4%. You also have to have a minimum credit score of about 670 to qualify for a good rate.Do your research to see if a balance transfer makes sense for you.
Apply for a personal loan
A personal loan is a solid idea if you’re eligible for one with a lower interest rate than what you’re currently paying on any credit cards or accounts where you racked up holiday debt. The personal loan allows you to use the funds to pay off your open balances. From there, you only pay a single payment for one account that has a fixed interest rate and repayment timeline. Depending on how it’s structured, the monthly payment could end up being less than what you’re paying now—which means you can use the extra money to fund your spring break.
What to be aware of
Qualifying for a personal loan with a low-interest rate often requires a credit score of at least 640. You’ll also want to look out for any potential origination fees that up the cost.
Related: Consolidating and Repaying Loans
Reset your budget
Take a moment to ask yourself why you accumulated holiday debt to begin with. Overspending can often be traced back to poor budgeting. A budget is a game plan for your money: it begins with tracking how much income you earn in an average month and your average expenses. This includes everything from rent to your phone bill, car payments to groceries, and medical expenses to entertainment money.
After tallying it all up, subtract your expenses from your income. What’s left is extra money you should use toward knocking out your debt faster. The amount left might not be as high as you’d like, but smart budgeting can save money and make vacation plans feel more possible.
Where to start
Jump into your online bank statements from the last few months. Where are you overspending? Something as simple as meal planning or making coffee at home could translate to instant savings.
Pick up a side gig
It feels like everyone has a side gig these days, and it makes sense. If you set your budget to cover all your regular expenses, any money you bring in from a side hustle can go directly toward your debt—something that will come in handy when spring break planning. In fact, 68% of people with a side gig are doing so to pay off debt, according to a 2018 Betterment survey. Even something as easy as selling your unwanted stuff online can be a kind of side gig and could be the thing that really supercharges your debt repayment.
Where to start
Start by taking a look at your skill sets to figure out ways you could monetize a hobby you already enjoy. Crafty types can take to Etsy; natural caregivers can explore babysitting or dog walking. Leverage your strengths. You can also fold a side hustle into your regular day-to-day routine. While running to the grocery store, consider fulfilling a Shipt order or making a Postmates delivery.
Make good use of your tax refund
Due for a tax refund this spring? While it may be tempting to hit the mall with your newfound money, consider funneling that cash toward your holiday debt. If you’re getting a decent amount for your return, that could dramatically lower your balances in one fell swoop. The average tax refund for 2019 was $2,781, according to the IRS.
Hit your highest interest debt first
High interest is usually the pitfall when trying to get out of debt, so consider targeting whichever balance has the highest interest rate first. It’s a strategy known as the avalanche method, and it’s usually your best bet.
Instead of focusing on the size of each balance or the minimum payments on your accounts, look at the interest rates. The higher the rate, the more you’re being charged to carry the debt. Knocking out the higher-rate accounts first will save you the most money.
What to be aware of
This is a little different from the snowball method, which has you eliminate your smallest balances first. While researchers say the avalanche method is one of the most effective debt repayment strategies around, the snowball method is still high on the list. Look into both to see which option may be best for you. Either way, be sure to continue making your other minimum payments along the way.
Related: Pay Off Graduate School Debt
While having holiday debt is never fun, it doesn’t have to be a total downer. Thinking outside the box and making a plan for getting ahead of it is the best way to prep your budget for spring break. And adopting these healthy money habits now is a sure-fire way to avoid taking on new debt during the next holiday season.
Find money to help pay off school-related debt using our Scholarship Search tool.