Dealing With ‘Debt Hangover’

‘Tis the season… To start paying off your holiday bills, that is. According to a recent AP news article:

Even before the 2007 holiday spending season began, Americans added more than $50 billion to their credit cards in the first 10 months of the year to reach a record total of $928.5 billion in October, according to the Federal Reserve. The additional spending in November and December undoubtedly pushed balances even higher.

It should thus come as no surprise that a recent poll revealed that the the top financial goal for 2008 is to pay down debt.

So how do you do it?

Obviously, spending less than you earn is the key to freeing up money for debt repayment. But what’s the best repayment strategy?

You may want to consider setting up a ‘debt snowball‘ of some sort… List your debts from lowest to highest balance or from highest to lowest interest rate, and then attack them from the top of the list down. Pay the minimum amount due for all cards, which is where you’ll direct any extra money that you can come up with. Once you’ve knocked out the first one, add that monthly amount to what you’ve been paying toward the next debt on the list, and so on. Before you know it, your debts will begin to melt away.

Another trick would be to apply for one or more 0% credit card offers and then transfer your balances to them while paying things off. Doing so effectively shield your debts from further interest charges, allowing you to pay things off faster than would otherwise be possible.