Dig yourself out of holiday debt

Four years ago, Angelina Fortini was $400 in debt after buying the perfect Christmas gifts for everyone on her list. "I felt like I should get everyone something equally good," says Toronto-based Fortini, who has since learned her lesson. Although her debt was tame, she now creates a holiday budget to ensure she doesn't spend more than she can afford.

Fortini is not alone. "People get really caught up in the spirit of Christmas and feel they need to spend money to show they care," says Laurie Campbell, executive director of Credit Canada in Toronto.

For those holiday shoppers who have yet to learn their lesson — or simply can't pass up giving like Santa year after year— here are five foolproof tips for digging yourself out of holiday debt.

Tip No. 1: Face the music

Don't panic, says Campbell. It's very easy to get overwhelmed when realizing you may have blown your budget. "Open up all bills and determine the total amount outstanding," she says, adding it's important to involve your partner or spouse in the process so that you can work together and create a plan of action. Then, review your financial goals to determine how soon you want to be out of debt and what payments you'll need to make to achieve this, she says.

But there is hope. "I've seen clients, once they have taken a hard look at the damage done from their holiday spending, go from debt-laden to debt-free in a reasonably short period of time," says Jeffrey Schwartz, executive director of Toronto-based Consolidated Credit Counseling Services of Canada.

Tip No. 2: Pay off your credit card bill in smaller increments

"A lot of people aren't aware that you can make a payment on your credit card ten times a month if you want to," says Doug Frain, a certified financial planner in Burlington, Ont. "Each time you make a payment, it's getting credited as of that date so you're saving interest, especially if it's a high-interest credit card at 28 per cent." Instead of waiting until the due date to pay it off, make smaller payments every time you get paid, says Frain.