For most people, Christmas is seen as the most splendid time of year for both young and old. All of us are excited to finish the year of work or school and devote some quality time with family and friends. They don’t call it the silly season for nothing either. Eating and spending too much is the norm and it’s pretty easy to lose track of your savings and your waistline! Taking a hard-earned break is fundamental for our psychological health, so it’s easy to overindulge in presents and holidays during the festive season. But alas, the new year arrives soon enough and we can all start afresh. Time to make some resolutions and plan out the year in advance.
Before we know it, we’re back in the same habits. Work, school, bills, stress. But what if you’re in the position where you spent excessively during the course of the festive season and now you’re in debt? Well, don’t be distressed, it happens to loads of people during this time of year. Thankfully we’ve got some suggestions on how you can successfully clear your Christmas debts in a timely fashion.
Produce a list of your debts
The very first step in repaying your Christmas debts is to determine how much you owe. Find a pen and paper and list all of the debts you have, coupled with the creditor’s, interest rates, next repayment date and repayment amounts. Try to be conservative here and list every single debt you have, regardless of how big or small. Once you’ve discovered your repayment amounts, you’ll need to devise a plan on paying off the principal, which leads us to our next recommendation.
Keep in mind that debts are composed of both interest repayments and principals. Paying the interest only will doing nothing long-term, so when you’ve worked out your repayment amounts, the next step is to create a plan on paying off the principal. It’s usually best to concentrate on the highest interest rate debts initially which will save you money over time. Interest on loans are a powerful force and can debilitate your finances if you don’t take care. You similarly might want to list your income streams at the same time so you can figure out how much will be left over for living expenses. This will assist you in our next tip, creating a budget.
To ensure that you can still enjoy the year in advance, you’ll need to repay your Christmas debt within the first quarter of the year, so forming a budget and adhering to it is critical. If you’ve had trouble adhering to a budget in the past, there are loads of great smartphone apps that can help you with managing your budget. Just because you’re on a budget doesn’t signify you can’t have any fun either. There are loads of free and inexpensive activities available, you just need to change your perspective and don’t let your Christmas debt take control of your life.
Save, save, save
Whilst it may sound obvious, the easiest way to pay off debt is to increase your savings and stay clear of unnecessary expenses. You might plan to stop dining in restaurants once a week which can save you a surprising amount of money. Or you can catch public transport to work to save money on fuel. If you feel inclined, cut up your credit cards! Do whatever you need to do to save money – being penny-wise is fundamental. Get in control of your expenses and save as much as possible; you don’t want your holiday debt hangover to last until the following Christmas!
Monitor your progress
Review your progress monthly to see how well your plan is performing. You might intend to make some changes if required, and you’ll have a better idea of what changes are rational depending on the past month’s efforts. If you’re being super disciplined and have over-performed, then reward yourself to commemorate your accomplishment. A reward doesn’t need to cost an enormous amount of money, but it will raise your motivation to stick to your plan in times of need. By budgeting and monitoring your progress, you’ll have better financial skills and hopefully won’t be stuck in the same position next Christmas!
If you can’t manage your debts, seek advice immediately
If you’ve sincerely tried to at least decrease your debts in a timely fashion and haven’t succeeded, you may be experiencing financial hardship. Rather than waiting and paying a growing amount of interest, it’s better to seek advice from the experts before your situation gets worse. There are many options available for those in financial hardship and they vary according to your individual circumstances. For a confidential discussion on how to effectively manage your debts, call Bankruptcy Advice on 1300 879 867 or visit www.bankruptcy-advice.com.au/