Party's over and the bills come due this month. Follow this formula to pay off your credit cards and nurse your finances back to health. By Erin Burt, Contributing Editor January 17, 2008 So you went a little crazy over the holidays -- perhaps a few too many gifts or nights out charged to your credit cards. Now the party's over, you're waking up to a hammering debt hangover and you're wondering how to undo the damage. RELATED LINKS How I Kicked the Credit-Card Debt Habit What It'll Take to Pay Off Your Balance Fix Your Money Screw-Ups On average, consumers were expected to spend more than $900 on the holidays, according to the National Retail Federation, and chances are many of us whipped out our credit cards to pay for those purchases. A holiday debt hangover can be hard to shake: From year to year, about one-third of consumers carry credit-card debt into the new holiday season from the previous one, according to Consolidated Credit Counseling Services. In fact, it'll take you about three years to pay off a $900 balance at 18% interest, assuming you make the minimum payment each month. Revolving credit-card debt, especially when you're young, can be hazardous to your financial health. Instead of using your money to do the things you need to (like saving, investing and eating), you're spending it on your credit-card bills, taking months and years to pay off purchases you eventually don't even remember making. But hey, you didn't come here for a lecture. You came here for help with those bills that'll be arriving over the next couple weeks. Here's a get-out-of-debt tonic to help ease your pain and get you back on your feet: Advertisement 1. Restraint It's no secret that the key to getting a handle on your debt is to spend less. I know what you're thinking. Budgeting and penny pinching is about as fun as watching a John Tesh music video. But stick with me here. We all have our favorite budget busters, whether it's that $4 cup of coffee, $10 movie, or a Chinese takeout addiction. Those purchases might not seem like much, but they can really add up. For example, that $10 movie once a week costs $520 a year. You don't need to take a vow of poverty, but take an honest look at your bank and credit card statements to see where your money's going. You might be surprised at how many unnecessary items you're buying. See 20 Small Ways to Save Big for ideas of where you can cut back. Any way you can trim your spending is money you can use to pay down your debt -- instead of adding to it. "Think of getting out of debt as a war," say Jason Anthony and Karl Cluck, authors of Debt-Free by 30. "Like any good general, you need to start allocating your resources to where they are needed most." Knowing where you're spending your money makes it so much easier to strategize your plan of attack. Advertisement As you evaluate your spending habits, keep an eye for two conditions that can prolong a debt hangover -- they tend to afflict young adults in particular: The needy-bugger virus: Victims consistently confuse wants with needs. For example, convincing themselves they need that new car, that $200 pair of jeans or that daily latte. Big-shot-itis: Victims are eager to show friends and family members that they are successful, even to the point of sabotaging their finances to keep up the charade. Symptoms include a big head -- and a swollen credit-card bill. 2. Strike a deal Another way to combat a debt hangover is to work with your creditors to negotiate a better deal. These moves will help you pay off your debt faster or lower your monthly payments if you're in over your head: Advertisement Ask for a lower interest rate. A five-minute call to your lender could save you hundreds of dollars on interest charges. Learn more. Consider a balance transfer. Shop for a new card with a lower interest rate. Watch out for introductory offers, though. You don't want to get reeled in with the promise of a 5% rate only to find that it'll shoot up to 18% after three or six months -- unless you're confident you can pay off your entire balance within the introductory time frame. Ditch the monthly fee. Your low-rate card may not be the deal you think it is if you're paying an annual fee. For example, if you pay $40 each month toward a $1,000 balance on a card with a 12% interest rate and a $50 annual fee, that's equivalent to a no-fee card with an 18.4% interest rate. Use our calculator to find out whether a low rate is worth the annual fee. Lower your student loan rate. If you haven't consolidated your student loans, you can shave between one and three percentage points off your interest rate -- saving hundreds of dollars -- by going with a lender that offers a discount when you make on-time payments or automatic payments from your bank account. You can compare deals through SimpleTuition.com. Advertisement Cut a deal on student loan payments. If you're in over your head, ask your lender if you qualify for a graduated payment schedule (your payments start out small and increase as, presumably, your income increases) or an extended payment period, such as 15 or 20 years. See How to Pay Off Student Loans for more tips. 3. Boost your income If cutting excess out of your spending and negotiating a better deal on your debt isn't enough, you may need to look for ways to make more money. Are you overdue for a raise? Jot down reasons why you deserve more money and set up an appointment with your boss. (Hint: Your personal financial situation should never enter the discussion. Learn more about the right way to ask for a raise.) Boss won't give you a raise? Boost your paycheck by adjusting the amount Uncle Sam holds back. If you get a big tax refund, file a new W-4 form with your employer so you can get that money throughout the year when you need it most. Use our easy-to-use withholding calculator to see how much you can add to your paycheck. You might also consider a second job, renting out a room, babysitting or mowing lawns for friends and relatives. Sell stuff in a yard sale, online (such as eBay, Amazon.com or Craigslist) or through a local consignment store. Set aside the extra cash specifically to pay down your debts. 4. Get professional help If you still can't scrape up the money to make the payments, don't wait until you've already skipped a payment or two -- get help now to set up a strategy. You can visit the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling Web sites to find nonprofit credit counselors in your area. They can set up reasonable repayment plans with creditors, as well as help you create a budget that works. Learn more about how to find credible credit counseling.