The Cure for Your Holiday Hangover: 6 Steps to Get Your Finances Back on Track

You know what feels worse than the day after a candy cane cosmo bender? January. That’s when last month’s festive, free-spending ways turn into stomach-churning debt. While there’s no quick and easy solution, there are some things you can do to help your finances bounce back. Here’s how to get started.

Assess the Damage

It may not be fun, but you need to be honest with yourself about your spending habits and debt, says Jonni McCoy, author of Miserly Moms: Living Well on Less in a Tough Economy. How much do you owe? Is your credit card maxed out or is your bank account simply running low? Where can you cut back? Digging yourself out of debt is a lot like another not-so-fun New Year’s endeavor -- a diet. “Everyone wants a quick fix, but real change takes real work,” she says. “It took a while to take on debt. It’s going to take you a long time to get rid of it.”

Cut Your Budget

You already know that trimming expenses frees up money you can put toward your debt. But to make the cuts stick, choose ones you can live with, suggests author and organizational expert Barbara Reich. That could mean anything from carpooling to work to brewing your own coffee to lowering the heat a bit at home. Also, consider slashing your grocery bill -- according to McCoy, it’s the largest unfixed expense in the American budget. Lower yours by up to 30 percent with simple tricks, like shopping sales and clipping coupons. And before you buy anything, Reich recommends invoking the 24-hour rule. “If your desire for the product hasn’t waned by then, you know it’s not just an impulse buy,” she says.

Negotiate a Better Deal on Services

You can often score a better deal on pricey services like cable, internet and cell phone just by asking for one, says Edgar Dworsky, founder of the advocacy site Consumer World. “Think about each of your expenditures and question whether there is a cheaper way,” he says. Scope out new customer and competitor offers to get a sense of how much you could save, then call your providers and ask for a break on your bill. While you’re at it, decide if you need all the services you’re currently paying for. (Hello, Hulu!). Dworsky says if the provider balks, you might have to threaten to switch to a competitor or downgrade to a less expensive tier of services, but you could free up a huge chunk of change to put towards your bills. 

Come Up With a Plan

Make a spending plan and stick to it. First, tally up everything you’ve spent in the past 30 days by category, like food, gas and entertainment. Look for areas where you can save, then make a realistic goal for each category, McCoy says. There are apps that can help with that -- check out CNNMoney’s faves -- but Excel or even a calculator are just as useful. 

Deal with Your Debt

Once the funds are flowing again, focus on paying off anything earning a finance charge. Start with credit cards with the smallest total debt, then move on to ones with bigger balances, McCoy says. Transferring hefty balances to a new, low- or no-interest credit card is a great way to buy yourself a little breathing room while you pay off your debts. Just be sure to make minimum payments on all of your cards, and don’t accept an offer from your credit card company to skip a payment or take a “payment holiday.” “Finances charges will continue to accrue during the skipped month, thereby helping the bank with its finances at your expense,” Dworsky says. “Don't fall for it.

Prepare for Next Year

While you should resist the urge to splurge right now, it does make sense to snap up deeply discounted holiday items you’ll eventually need. Wrapping paper, boxed cards, gilded decor and cheap toys are just few worthy ways to spend your hard-saved cash. Of course, the most important thing is to not be quite so naughty next year—or to plan ahead if you know you will be. “Take a look at how much debt you incurred this season and divide by 12,” says McCoy. “Then put aside that much each month so you’re not in the same pickle next January.”

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