If excessive spending combined with a poor economy has Christmas debt dragging you down then get ready to tighten that budget belt to get out from under it. Reuters report is predicting, Excessive spending over Christmas will fuel personal bankruptcies in the first three months of the year and that 28,000 people will become insolvent in the first quarter of 2008, a third of whom are expected to file for bankruptcy as a direct result of debt racked up over the festive period.

Those are frightening numbers, especially if you are one of those having to make a decision of filing bankruptcy or not. Never fear though, you can work through the debt during that first quarter of the year and put yourself in a better financial position; at the same time, you can start planning early for next Christmas so you do not end up again struggling financially.

The first step is to sit down and see how bad off you really are. Gather those credit card statements, bank statements and any other credit account statements and start adding it all up. You may have to add it up several times before you believe your eyes. Those expenditures add up quick! First, avoid spending further to try to pay off existing debt, this will lead to more problems in the end. Then, talk to your creditors – do not just stop payments without explaining why. They can sometimes be more understanding than you would expect. Sit down and work out how much you owe and how much you need to pay your priority debts, like mortgage, rent, gas and electricity bills and such. Pay the priority debts first every month and then work out how much you need for food, travel to work and other everyday expenses.

Once you have done all of that, you can start to work out what you can afford to pay each month to non-priority creditors like credit cards, store cards etc. If what you have left, does not cover what your non-priority creditors are asking for each month, speak to them and come to an arrangement about how much you can afford to pay them. Only offer to pay off debts at a rate you can keep up, it is easy to be panicked into offering more than you can afford. If you need help to do that or they will not listen, make an appointment to see a money adviser or call one of the many non-profit debt consultants, it will be free and they will have extensive experience in dealing with creditors.

Once you have a plan in place then it is time to begin thinking about the next holiday season. A bit of pre-planning and early spending could take a big chunk of the expense and stress that is a usual symptom of the holidays. The first thing I suggest is to create a buying list. List all the people you normally buy for and the things they like. Carry a copy of the list with you everywhere in case you run across an item they would like that may be on sale.

Some other things to do include using cash whenever possible. You should become more conscious of spending when you have to pay in cash. Paying in cash allows you to keep track of your purchases in real time and by doing so you should be able to keep yourself from splurging. Make a real effort in using your credit card wisely. Use your credit card only when necessary. Sacrifice your little pleasures. This can mean little sacrifices like cooking home meals instead of eating out and drinking instant or office-made brewed coffee instead of going to expensive coffee shops. Before you know it, you will have enough savings to pay for some of your holiday gift giving expenses.

Lastly, if you really find yourself struggling each year you may want to look for additional sources of income. You may can monetize a hobby and make good money out of it. If you are good in photography, why not take photos of your fellow workers during the Christmas party and sell them their photos? Or if you bake a mean chocolate cake, why not sell them during the holiday season? Who knows, your sideline can become a business someday, which will help you improve your finances.

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