Don't Get In Debt For Christmas

It comes but once a year but leaves thousands of us still paying it off in the summer -- don't fall foul of a Christmas binge this year!

One thing that really upsets me each January is hearing how stressed a number of Fool readers become after overspending at Christmas.

Although the festive season is a wonderful time of year, all too many of us get carried away with the parties, Christmas meals and the wish to buy lavish gifts for our loved ones, meaning that we start the New Year in that dreaded word, debt. And of course, with many of us being given ridiculous credit card limits and overdraft facilities it's all too easy to spend more than you earn.

What's more, I know a number of people who have only just paid off the debt accrued last Christmas this month - but are ready to wield that credit card and start all over again!

But just take a moment to take a deep breath before you hit the shops to do your Christmas shopping. Are you already in debt -- and by that I don't mean mortgage debt? Do you have an outstanding balance on your credit card, or are you paying off a personal loan or overdraft?

If the answer is yes, it's time to think carefully before spending any more. Remember, the more you owe, the more interest your debt will accrue and the longer it will take you to pay it off. And I don't know about you, but I absolutely hate owing any lender any money -- and knowing that the interest I'm paying them is effectively going into some overpaid director's bonus!

Tackle Those Debts

Firstly, work out how much you owe. Don't avoid those statements, open them up! The easiest way to work out where you stand is to fill in our Statement of Affairs (SoA) calculator, which will list your income and outgoings.

From here you can work out that all important sum -- how much money you have left over at the end of each month. Now you must do the really scary bit -- add in all of your debts and their interest rates.

Now here's the positive bit that'll make you start to feel a bit better -- it's time to do something about it all. For a start, can you stop your credit card debt from increasing for a while by moving your balance to a 0% card for balance transfers? If you're paying a high rate for your personal loan, could you move that debt to a best buy loan product? By limiting the amount of interest accrued you'll pay them off much more quickly.

Additionally, can you cut your bills down, re-mortgage your home, and give up expensive subscriptions (such as gym membership/Sky)? Make it your mission to save every pound you can.

Increase your income

While you're at it, have a think if there's any way you can increase your income (legally of course!). Could you take on a second job for a while, sell any possessions; rent a room in your home? Look at your skills set too: could you teach foreign language/musical instrument/computer skills?

Snowball those debts

Once you've done what you can to maximise what you have, it's time to work out how to prioritise your debts. And the best way to do this is to use an old Foolish technique -- snowball them!

By this I mean look at all of your debts and see which one is charging the most interest -- this is the one which is growing the fastest and needs to be tackled first. A credit card (charging 18.9% APR) will therefore take priority over a personal loan (charging 6% APR) even if you owe more on the loan, as it's growing faster.

Continue to make the minimum payments on all of your borrowings, but in addition, throw all of your spare cash at the most expensive debt. When you've paid that one off, switch to the next most expensive, and in addition to its minimum payment throw your extra cash at that one. You'll gradually find you'll be throwing larger and larger "snowballs" of cash at your debt until finally, it will all be clear.

If, however, your debt situation is more serious and you need a bit more help, don't panic, plenty is available. Find out how to deal with your creditors here, and consider using our fantastic Dealing With Debt discussion board. It's full of friendly, knowledgeable Fools who know what you're going through and can give loads of helpful advice on what to do. Additionally, check out places such as your local Citizens' Advice.

And finally, going back to Christmas, please, please don't get into more debt to pay for soon-to-be forgotten luxuries for one day of the year. Work out how much you can realistically afford to spend and stick to it -- and if that's nothing, then be honest and tell your friends and relatives how things stand. You never know, they may just be in the same boat.

More: Christmas money saving tips | Five Top Ways To Clear Your Debts | Get Out Of Debt