Holiday debt hangover: How to get your finances back on track

Recent surveys show a growing number of Canadians carry holiday-related debt into the new year and feel more financial pressure because of it. In this article, we’ll explain what’s behind this holiday hangover, why this type of debt has become so common, and provide practical steps to pay it down so you can get your finances back on track.

The state of holiday spending & debt in Canada

According to Spergel’s latest Financial Hangover survey, about half of Canadians (51%) carried new holiday debt into 2026, and nearly three in 10 are starting the year with over $6,000 in holiday-related balances. At the same time, 75% report feeling more financially stressed than in past years, and nearly one in five expect to fall behind on credit card payments.

“These figures show how easily seasonal spending can morph into a long-term debt trap when you’re dealing with 19.99% or 29.99% APR. That ‘hangover’ doesn’t just go away, it grows,” says Ronique Saunders, Credit Canada Credit Counsellor. According to Spergel’s survey, nearly one in three Canadians say it will take six months or longer to recover financially from holiday spending.

These impacts go beyond numbers on a statement. Carrying high balances increases your credit utilization, which can hurt your credit score and make future borrowing more expensive. High balances also trigger significant interest charges and monthly interest expenses, which can quickly drain your cash flow and increase the total amount you owe. And seeing a large balance month after month adds emotional stress, making it harder to save or plan for the rest of the year.

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Many Canadians carry holiday debt into the new year because of a few common money habits. One is present bias—focusing on enjoyment now and pushing costs into the future. Another is optimism bias—expecting finances to recover without a clear plan. These habits are normal, but they can cause debt to stick around longer than expected, especially as credit card interest adds up.

Step-by-step financial recovery strategies

Understanding how common this “holiday hangover” is—and taking steps to tackle your debt—can help you regain control of your money and reduce both financial and emotional stress as the year begins. Here’s how to get started.

1. Assess your current situation

The first step to getting back on track is to figure out where your money stands. Pull out your January credit card and bank statements and tally up any holiday debt. Seeing the numbers in detail provides a foundation for every decision that follows.

A helpful way to start is by creating a “financial photograph.” This is a snapshot of your finances at a specific point in time, showing what you own versus what you owe. To create a financial photograph, use a piece of paper or a spreadsheet and list everything you own (savings, investments, maybe a home) and then subtract what you owe, such as credit card balances or loans. This will give you a clear picture of your net worth, separate from your everyday budget.

“Understanding your complete financial situation allows you to identify, organize, and create a realistic plan to pay off what you owe,” says Saunders.

2. Create a realistic 2026 budget

Consider your budget a spending roadmap for the year ahead, taking into account a plan to reduce your holiday hangover debt. When creating a budget, you can use a budgeting app, spreadsheet or a simple piece of paper to list your income and expenses—including debt payments. Determine how much money you have to spend each month and compare it with how much you pay for various bills and items during that same period. This will help you identify where you can cut back. Those savings can then be directed to your debt so you can pay it off sooner.

The goal is to allocate as much as you reasonably can towards the debt while still covering your necessary expenses. “A realistic 2026 budget doesn’t need to feel restrictive—it should simply reflect your values, priorities, and financial goals for the year ahead,” says Saunders.

3. Prioritize high-interest balances

Once you have a budget in place, you can analyze your cash flow to determine the best debt repayment strategy. Keep in mind that not all debt costs the same. Credit cards usually carry the highest interest rates, so paying them down first saves the most money over time. 

Two common repayment strategies are the snowball and avalanche methods. The snowball method focuses on paying off your smallest balances first, giving you quick wins that build momentum. The avalanche method focuses on the highest-interest balances first, which reduces the total interest you pay and can shorten the overall repayment period. 

Counsellor Tip: If your interest rates are over 20%, the avalanche method is almost always the better choice to stop the “bleeding” of your monthly income. 

4. Increase cash flow

Boosting the money you have available can speed up your holiday recovery. Look for temporary ways to earn extra income, such as freelance work, part-time jobs, or selling items you no longer use. You can also free up cash by reviewing subscriptions or non-essential spending and redirecting that money towards debt repayment. 

5. Pay more than the minimum

Minimum payments may feel manageable, but they keep you in debt longer and increase the total interest you pay. Whenever possible, aim to pay a larger portion of your balance—as much as your budget allows.