Presents for the kids, a big food feast for friends and family, maybe some travelling… there’s nothing quite like the holiday spirit.
But when the music stops and the decorations come down, you need a plan to tackle that holiday debt (and other debt you may have on top of it) before it turns into a hangover. So, here are some tips to get you started.
How much money do you owe?
If you’d like to feel back in control of your finances, getting a good, clear picture of how much money you owe is a good place to start. Grab pen and paper (or your phone) and add up your credit card debt, any buy-now-pay-later balances still hanging around and any hire purchases or other loans you’ve taken out. Then, proceed to the next step…
Choose your way out of debt
There are many different strategies to methods to get out of debt faster, but here we’ll stick to two of the most popular: ‘snowball’ and ‘avalanche’.
With the ‘snowball method’, you focus on paying off the smaller debt first, while making the minimum payments required on all other debts. And so, small win after small win, the momentum may take you places you didn’t think possible.
The ‘avalanche method’, on the other hand, requires you to pay off the highest-interest loans more quickly, and then work your way down until you only have the lowest-interest or interest-free loans left. This way, you’re not keeping expensive loans hanging around any longer than you need to.
Avoid taking on other debt (if possible)
While you’re paying down what you owe, you may want to avoid borrowing more than necessary. Some people literally freeze their credit cards in blocks of ice, and to be honest, that’s probably a bit extreme. But the principle is still valid.
Can you boost the money coming in?
If your current income doesn’t allow you to make significant progress on paying off your debt, you may want to explore other income sources. Is there a skill you can turn into a money-earner? Anything you don’t use that you could happily sell, to raise a bit of cash? This step may not for everyone, but it’s worth considering nonetheless.
Prepare for next year’s holidays
We get it – this year’s holidays haven’t even started yet, and it seems way too early to think about the next one. But preparation is key, and you have a big advantage: you know exactly when the 2023 holiday break will be, so you can take small steps towards it.
For example, most banks allow creating unlimited savings accounts using your Internet banking or the bank’s app. So, why not create one for next year’s holiday spending and then set up an automatic transfer of $20 a week from your main account? Within 12 months, you’ll have about $1,000 available almost without noticing it.
Like to catch up?
We can help you get a financial plan in place so that you hit your goals this year – and in the future. Drop us a line today.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.