If you spent a pretty penny on holiday-related shopping and activities in recent months, you’re not alone. Between Nov. 1 and Dec. 26, 2024, U.S. retail sales (excluding automotive) increased 3.8 percent year-over-year, according to Mastercard SpendingPulse. This included increased spending growth of 3.6 percent on apparel, 4 percent on jewelry and 3.7 percent on electronics.
If you’re entering the new year with increased debt or decreased savings, chances are you have goals of paying off credit cards and building up your savings account. These are common financial resolutions in 2025, as prices have been rising on shelter, food, auto insurance and transportation services, despite an overall decrease in inflation in recent years.
Fortunately, some simple steps can help you get on the right financial track and sleep better at night.
1. Make a spending and saving plan
The key to money management is knowing how much comes in and goes out every month. Using a spreadsheet, pen and paper or a budgeting app, list your monthly income and expenses. Identify ways you can reduce spending, such as dining out less frequently, lowering your grocery bill, canceling subscriptions you don’t use or shopping around for more affordable car insurance. Dollars that can be removed from spending categories can be moved into buckets devoted to saving money or debt repayment.
You can also consider ways to increase your income. These can include asking for a raise, increasing your hours worked (if hourly), starting a side gig or getting a part-time job. For extra money, you can sell items you no longer need.
A budgeting app can help simplify the process of listing out your income and expenses. Apps like You Need a Budget, PocketGuard and Goodbudget contain user-friendly features for tracking spending and increasing savings. Some banks feature budgeting tools built right in for customers, including Bank of America and Chase.
2. Find a savings account with the best rate
A savings account provides easy access to cash when you need it, making it a good place for an emergency fund. Not all savings accounts are equal, however, since rates can vary a great deal among banks. Many big banks pay rock-bottom annual percentage yields (APYs), while some online banks and credit unions pay yields that are well above the national average.
“Shopping around and putting your money in a high-yield savings account can put hundreds of dollars in additional interest earnings in your pocket,” says Greg McBride, CFA, Bankrate chief financial analyst. “Additional return without sacrificing access to the money when needed or the protection of federal deposit insurance — it is the only free lunch in finance.”
A high-yield savings account can earn you hundreds, if not thousands, more in interest than an account earning a rock-bottom annual percentage yield (APY) of just 0.01 percent. For example, here’s approximately how much $10,000 would earn you in one year in savings accounts earning a range of APYs:
- High-yield savings account earning 4.75 percent APY: $475
- Savings account earning the current national average APY of 0.57 percent: $57
- Savings account earning rock-bottom APY of 0.01 percent: $1
High-yielding accounts can often be found from online-only banks, which may offer the rates to draw customers away from established brick-and-mortar banks. Conversely, large banks are generally known for offering paltry yields on deposit accounts.
3. Separate your savings according to goals
Some banks and credit unions can help you save money by allowing you to devote portions of your funds to different goals. To avoid going into debt when the next holiday season arrives, you might use this strategy to set up a dedicated holiday shopping fund. Be sure to include goals for an emergency fund, retirement and other larger upcoming purchases.
Alliant Credit Union allows its members to open up to 19 supplemental savings accounts, each of which can be used to fund a specific goal.
“Supplemental savings accounts help people set aside money for specific goals like an emergency fund, vacation, and celebrations without mixing it with their primary accounts,” says Sean Briscoe, director, products and payments at Alliant. “They offer a way to organize finances more efficiently, track progress toward goals, and maintain discipline by keeping the funds separate. A supplemental savings account may also offer competitive rates, allowing savings to grow faster over time.”
No matter how many goals you’re saving for, ways you can make saving money easier include setting up automated transfers from checking to savings every payday. Or, you could split your direct deposit so that a portion goes to a savings account.
Another option is to use a bank account that lets you round up the change and transfer it automatically to savings each time you make a debit card purchase. Banks that offer this option include Bank of America and Chime.
4. Create a credit card repayment plan
Whether due to holiday shopping or other expenses, you may have accumulated balances on multiple credit cards. The various strategies on how to pay off such debt include the avalanche method, which consists of paying off the credit card with the highest interest rate first and continuing with the strategy until all your debts are gone. A benefit of this strategy is you’re removing the debts that are costing you the most money in interest first.
Another strategy is the snowball method, which involves paying off your credit card balances in order from the smallest to the largest. “An example of this is if you have one with $500 and one with $5,000, you are best to start with the smallest card first no matter the interest,” says Keith Heritage, investment advisor representative and founder of Heritage Financial Services in Newberry, Florida. “This allows you to gain momentum and helps with the process.”
5. Do a credit card balance transfer
Consumers can help pay down credit card debt through a balance transfer to a card with a low interest rate or a zero-percent rate, Heritage says. Transferring your balance to a card with a zero-percent introductory period allows you to pay down a balance without incurring additional interest.
Such balance transfers can be useful for anyone with high-interest debt who needs more time to pay it off. Those with good or excellent credit scores often qualify for top-rated balance transfer credit cards with longer low-interest or interest-free introductory periods.
Note that most balance transfer cards charge transfer fees of 3 percent to 5 percent of your balance.
6. Curb your credit card spending
Whether you’re paying down a credit card balance or determined to keep out of debt, reevaluate how you use your credit cards. You can avoid being hit with hefty interest fees by not charging more than you can pay off completely when the bill arrives. One way to reduce your credit card bill is by canceling subscriptions, memberships or other services you’re charged for every month that you don’t use.
Other ways to reduce spending include finding free or low-cost activities instead of pricey events and hobbies, meal planning and prepping and reducing unnecessary expenses, such as clothing. You can lower your grocery bill by using coupons and cash back apps, purchase items with the best per ounce value, shop sales, sign up for the store’s loyalty program and avoid impulse buys.
Reducing your monthly credit card charges frees up money in your budget that can be used to pay down the balance faster.
7. Put windfalls to work
It can be tempting to book a vacation or go on a shopping spree when you receive a financial windfall such as a tax refund, work bonus or inheritance. Rather, consider putting some or all of the money toward savings or debt repayment.
One way to use a financial windfall is to set it aside for holiday-related expenses you’ll have next winter. This can help you avoid generating credit card debt when you’re ready to start spending money on things like gifts, parties or trips during the holidays. You’ll thank yourself the following January when the big credit card bills don’t arrive.
Whether you’re getting a windfall or just saving money every paycheck, a safe place to earn interest can be a high-yield savings account, money market account or a certificate of deposit (CD). Note that with a CD, withdrawing the funds before it matures often results in an early withdrawal penalty.
Bottom line
Many consumers find it easy to fall into debt around the holidays. But putting these practical strategies to work can help you bring down your credit card balance and build up your savings.
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