For many people, Christmas is considered the most joyful time of year for both young and old. Most of us are excited to finalise the year of work or school and spend 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 incredibly easy to lose track of your savings and your waistline! Enjoying a hard-earned break is fundamental for our mental health, so it’s easy to overindulge in presents and vacations during the festive season. But alas, the new year comes around soon enough and we can all start anew. Time to make some resolutions and plan for the year in advance.
Before we recognise it, we’re back in the same routine. Work, school, bills, stress. But what if you’re in the predicament where you spent excessively during the festive season and now you’re in debt? Well, don’t be spooked, it happens to many people during this time of year. The good thing is we’ve got some advice on how you can successfully repay your Christmas debts in a timely fashion.
Produce a list of your debts
The very first step in clearing your Christmas debts is to work out how much you owe. Take a pen and paper and list each of the debts you have, as well as the creditor’s, interest rates, next repayment date and repayment amounts. Aim to be conservative here and list every single debt you have, no matter how big or small. Once you’ve worked out your repayment amounts, you’ll need to work out a plan on paying off the principal, which leads us to our next suggestion.
Don’t forget that debts includes both interest repayments and principals. Paying the interest only will doing nothing long-term, so after you’ve determined your repayment amounts, the next step is to create a plan on paying off the principal. It’s always best to focus on the highest interest rate debts initially which will save you money in the long run. Interest on loans are a powerful force and can cripple your finances if you don’t take care. You similarly may wish to list your income streams also so you can determine how much will be left over for living expenses. This will assist you in our next tip, creating a budget.
To make sure you can still enjoy the year ahead, you’ll want to clear your Christmas debt within the first quarter of the year, so forming a budget and following it is vital. If you’ve had trouble following a budget previously, there are a lot of great smartphone apps that can assist you with maintaining your budget. Just because you’re on a budget doesn’t imply you can’t have any fun either. There are plenty of free and low-cost activities available, you just have to alter your perspective and don’t let your Christmas debt take control of your life.
Save, save, save
While it may sound obvious, the quickest way to pay off debt is to increase your savings and stay away from unnecessary expenses. You might plan to stop eating out once a week which can save you a surprising amount of money. Or you could catch public transport to work to save money on gas. If you feel inclined, chop up your credit cards! Do whatever you need to do to save money – being frugal is critical. Get in control of your expenses and save as much as possible; you don’t want your holiday debt hangover to last until next Christmas!
Monitor your progress
Review your progress each month to see how well your plan is performing. You might wish to make some changes if required, and you’ll have a better idea of what changes are rational based upon the past month’s efforts. If you’re being super disciplined and have over-performed, then reward yourself to celebrate your success. A reward doesn’t need to cost an exorbitant amount of money, but it will enhance your motivation to stick to your plan in times of need. By budgeting and monitoring your development, 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 genuinely tried to at least decrease your debts in a timely fashion and haven’t prevailed, you may be experiencing financial hardship. Instead of 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 appropriately manage your debts, call Bankruptcy Experts Penrith on 1300 795 575 or visit www.bankruptcyexpertspenrith.com.au