While the holidays are for bringing loved ones together, they can also be very expensive. Many shoppers find themselves struggling to pay down credit card debt, and other debts, that have stacked up when the holidays are over and reality sets in.

According to the American Research Group, shoppers spent over $900 on average during the 2016 holiday season. That does not include debt that most Americans already have. Forty million Americans have student loan debt and seven million have credit card debt. With interest accruing every day, the debt may seem as if it will never go away; however, there are two strategies that are known to help with debt reduction: snowballing and debt stacking.

Snowballing is listing all debts in order from the smallest to the largest and paying off the debt in that order. After paying the minimum balance for all the debt, put any extra money towards the smallest debt, none of the others. For example, listing the debt would look as follows: Student Loan $2,000 ($96 minimum payment), credit card $2,600 ($63 minimum payment), and car loan $6,000 ($135 minimum payment). After the smallest amount of debt is paid off, payments toward the next smallest debt start including the money that is no longer going towards the debt that has just been paid off.

Snowballing has some pros and cons. The pros are that there is an immediate sense of victory when the debt is paid off and there is more motivation to pay off larger debt. The cons are that even the small debt may take a while to pay off and overall more money is put towards interest.

Debt stacking is when debt is listed highest to lowest in terms of the interest rate. The dollar amount is not considered. The same debt as before might be ordered this way: credit card $2,600, car loan $6,000, and student loan $2,000. Then, once the debt with the highest interest rate is paid off, payments towards the debt with the next highest interest rate will include payments allocated for first debt as well.

Debt stacking also has positives and negatives as well. Overall, less interest is paid and more money is saved in the long run, but this method takes a lot longer and there is less of a sense quick gratification. Whichever method is chosen is up to personal preference and what works for one person may not work for another.

Overall, the most important thing is to take control over debt before it takes the control.



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