Deck the debt after you deck the halls - WAFF-TV: News, Weather and Sports for Huntsville, AL

Deck the debt after you deck the halls

Using your tax refund dollars to pay debt makes a lot of sense. (Source: WAFF) Using your tax refund dollars to pay debt makes a lot of sense. (Source: WAFF)
HUNTSVILLE, AL (WAFF) -

Statistics show the average American family spent around $780 on Christmas gifts this year. 

That's up $75 dollars from 2013. And a large number of those purchases were put on credit cards. 

But now many of those bills are about to be due.

So how do you avoid a financial meltdown and not go into serious debt?

Americans have turned to credit cards to pay for everything. Some are able to pay off the balances every month,

"Paying that down is a good thing," said Calhoun Community College economist Derek Berry. 

But the real trouble comes when people either can't or don't get a handle on the balance.

"It seems to me a lot of young people especially just focus on the minimum payments,” said Berry. "Doing that, you're going to stay in that debt trap for a long time."

According to creditcards.com, the average American household carries $5,700 in credit card debt. And financial experts believe Christmas spending is only helping drive that number higher.

"You can wander into debt, but you certainly can't wander out,” said Dana Holt.

Holt said she learned that lesson the hard way. But this Christmas, the Shoals mother didn't go further into debt.

"You have to have a plan,” said Holt. “You have to have a goal.”

Holt and her husband started attending Christian based radio talk show host Dave Ramsey's Financial Peace University. The program was set up through their church several months ago.

"It's just changed our lives. We have freedom now to do things we couldn't do before,” said Holt.

According to the Shoals mother, the 9 week program taught her family how to spend and save money but more importantly helped pay off their debt quickly. Dave Ramsey uses the debt snowball method. The strategy is simple. Get on a written budget. Right down all your debts from smallest to largest and wipe them in that order.

"And you attack it with a vengeance,” said Holt. “You take every dollar you can out of your budget and you attack that baby. When it's gone you roll that payment to the next one and that snowball just picks up snow every time it rolls. You can make tremendous progress.”

But it is okay if the debt snowball strategy sounds like a little too much for you.

"There's a lot of resources out there,” said Huntsville bankruptcy attorney Jeffery Irby. “I have a pen in my hand right now... and this is called credit counseling."

Irby refers people down that road all the time. Some have a lot of success. Bankruptcy is another option. However, Irby said it's more of a last resort.

"The goal is to help them,” said Irby. “Period. That's the end of the story."

He suggests the best way consumers can avoid a trip to his office and help themselves is to wipe out that Christmas credit card debt. That's why he offered this tip for those who went little over budget on gifts.

"If you have a tax refund coming in, then bite the bullet and send all of your tax refund money to pay off your credit card debt."

Finally, most financial experts say if you're feeling overwhelmed by your holiday debt, take a deep breath and relax. But ultimately make the decision to take control and get on a plan.

"Christmas is on December 25 every year. It's not a surprise. You know when it's going to come,” said Holt. “If you put a little bit of money away every month, you could have Christmas and not worry about it, and it be fun for a change."

If you're interested in the debt snowball method, we have a debt snowball calculator that can help you get started. It also shows how long it could take to get out of debt.

Also beware of common misconceptions about settling your debt so you don't get cheated.

Click here for a free, interactive budget worksheet.

Copyright 2015 WAFF. All rights reserved.

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    Thursday, January 22 2015 9:20 PM EST2015-01-23 02:20:41 GMT
    Thursday, January 22 2015 9:20 PM EST2015-01-23 02:20:42 GMT
    Dave Ramsay plan'Snowball' calculatorBudget worksheetDebt misconceptionsMore >>
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