6 Remedies For a Debt Hangover

Cheers to a New Year and another chance for us to get it right.

~ Oprah Winfrey

OK, so you overindulged. You read all of those articles warning about moderation or complete avoidance. You intended to follow that prudent advice. But you didn’t. I could easily be talking about alcohol consumption or debt consumption. Either way, over-consumption will put you in a precarious position.

If you’re not in that position on either front, congratulations. If you are, you’re not alone. Debt has been in the news a lot lately and if you read my post on 2010 What Ifs, you know that I think it will be a big topic this year. Sovereign debt problems are simmering in many parts of the globe and are coming to a full boil in others, particularly the PIIGS countries. This has led many to ask the question: Is sovereign debt the new subprime?

Bank of Canada Governor Mark Carney has been pushing debt prudence, and Rob Carrick wrote an article warning us to wrestle down our debts. (If you want a deeper understanding of the economic effects of debt and the consequent deleveraging that it necessitates, you can read John Mauldin’s recent newsletter on the topic.)

Feeling guilty about your over-consumption won’t help and there’s no sense crying over spilled egg nog. So how do we cure a hangover? I thought we’d first look at a few of the remedies for an alcohol hangover and then see if we could draw any parallel cures for a debt hangover.

6 Hangover Remedies

1. Sleep: Get some rest and let your body heal and recover. How long you need to sleep will depend on the severity of  your hangover.
2. Replenish Liquids: Excessive alcohol leads to dehydration. Rehydrating with water, juice, or sports drinks like Gatorade helps counteract that.
3. Avoid Caffeine: Some home remedies call for black coffee. Medical experts tell us this just makes things worse, as it contributes to further dehydration.
4. Physical Activity: I guess the severity of your hangover might dictate how vigourous you want to get with this one.
5. Eat Healthy Foods: Many recommend foods high in minerals like pickles (?) and fish.
6. Hair of the Dog: I never understood how consuming more alcohol could possibly help, but I know some people swear by this “remedy”.

6 Debt Hangover Remedies

1. Stop/Control Spending: It’s the old “if you’re in a hole, stop digging” thing again. How strictly you limit your spending should be directly tied to the severity of your debt problem. If you have only incurred modest debts, cut your spending accordingly. If, however, you are in so much debt that you can barely make your minimum payments, you will need to make cuts that are painful, but absolutely necessary. Just think how great you’re going to feel when that debt hangover is gone.
2. Replenish Cash: Once you have cut spending and paid down your debt, you need to build savings. If you can keep your spending cuts in place, use the extra cash to build an emergency fund so that unexpected or sudden expenses won’t lead to another debt hangover.
3. Avoid Malls and Credit Cards: Avoid places that normally cause your spending discipline to falter. If you are someone who overuses credit cards, don’t bring them with you when you go out unless you have a specific purchase in mind. Buy only the items you planned on and do not pay more than you have budgeted for those items. Otherwise, your debt hangover will only get worse.
4. Physical Activity: This can be good for a debt hangover as well. It can reduce stress levels, increase your overall health, keep you out of the mall, and help you work off those holiday calories.
5. Consume Wisely: Counteract poor spending practices by resolving to organize your finances, assess your balance sheet, set a budget, and save for your future. You can read more about these topics in the Balance Basics series. Adopt healthier consumption habits like cutting down eating out, shopping only with a list, and planning larger purchases in advance. (By the way, alcohol can get pretty expensive too, so if you cut that down or out, you can kill 2 hangovers at once!)
6. Hair of the Dog: Again, I don’t get it. I can’t see any conceivable way this could help with a debt hangover. Well, maybe if you swapped some high interest credit card debt for lower interest debt on a line of credit? Still, that’s just moving debt around.

If you think you might need professional debt advice to sort out your money problems, try this site.

So what do the medical experts say about hangover “cures”? According to the British Medical Journal:

• The alcohol hangover has substantial economic and health consequences.
• Compliance with moderation to prevent alcohol hangover is poor.
• No compelling evidence exists to suggest that any conventional intervention is effective for treating or preventing the alcohol hangover.
• The most effective way to avoid the symptoms of alcohol-induced hangover is to practice abstinence or moderation.

You could easily replace “alcohol hangover” with “debt hangover” in every point above and you’d have it just about right.

Are you suffering from a debt hangover after the holidays? What is your plan to cure it?