Cure Your Holiday Debt Hangover

Went a little overboard during the holidays? Join the crowd. Surveys show that the average consumer blows his or her holiday budget by 15% to 30%.

Let's waste no time lamenting our overindulgences -- it's time to get those finances back in tip-top form.

Belt-tightening 101

Dieting is so de rigueur this time of year. But more fruits and whole grains aren't going to do anything to slim down your spending. Debt triage requires a crash course in cash control. That means you need to:

Assess the damage. Use online calculators to see exactly what it'll take to pay off the cards.

Devise an aggressive payoff plan. It's worth repeating that paying it off requires that you mail in a sizeable chunk more than the minimum payment. Come up with your per-month debt payoff schedule and start digging in the couch cushions for extra coins.

Cut back on your biggest expenses first. You'll see the biggest payoff for your efforts if you're able to shave your spending in the meals, entertainment, transportation, and apparel/personal care categories.

Institute strict spending limits. For this I like the "envelope method" of budgeting, where you carry only the amount of cash you have to devote to those expenditures each week. Leave the cards at home.

Sell stuff. EBay, Craigslist, and Amazon.com's Marketplace all have platforms to help sellers clear out their closets.

Cut back on other savings goals. The vacation, new car, and highlights will have to wait.

Don't borrow from your future. Sure, you can take out a home equity loan or borrow from a retirement account, but don't. It's a bad habit to start, plus the fees, taxes, and lost growth potential make it a very unattractive trade-off. If you do need to cut back on your retirement savings, do so only to the point where your employer no longer matches your contributions. Once you're done paying off the debt, return to your previous levels of participation.

Get the whole family in on it and offer rewards (cheap ones!) for those who spend the least each week and another for everyone when Holiday '06 is finally paid for in full.

Make a list for Holiday '07

If you put most of your holiday purchases on a credit card, guess what? You have a starting point for next year's year-end budget. (See, credit cards aren't all bad.) Use it as a blueprint for setting up a monthly savings plan.

Once your "What I Owe" column is back to $0, start socking away money each month in a separate, hands-off savings account. (Check out some of the high-yield money market savings accounts out there. You'll earn interest on your savings, and because of built-in withdrawal limits, you'll be less tempted to dip into the account during the rest of the year.)

And to fast-track your payoff plan, check out "Make One Phone Call and Save $756" for an easy way to shave money from your debt-payoff plan.

Since joining The Motley Fool, Dayana Yochim dropped the "shop to save" approach from her financial workout plan. She is the advisor for Motley Fool GreenLight (at www.GreenLight.Fool.com), a personal finance/beginning investing service that provides easy-to-follow remedies for every kind of financial hangover.