Now that the holidays are over, many of us are starting to face the less pleasant result of the season: debt repayments. Post-holiday debt comes around every year, but it never gets any easier to swallow. If you’re having a hard time dealing with repayments, you might be wondering what the best approach is. Each person’s experience will be different, but here are a few common tips to help you get started.
Take an honest look at your debts
You need to start by examining just how much debt you have. It might be painful, but the simple truth is there’s no way to put your debts behind you if you don’t face them head on. Dive into your bank account and look at your statements. Make a list of how much you owe, the interest rates you’re looking at, and the due dates. It’s important to comb through your bank account carefully, instead of trying to recall your spending from memory. The holiday season is notorious for drawing us into impulse buying items that weren’t on our lists, and it can be easy to forget these purchases later on. Plus, you also want to make sure you recognize all the expenses you see on your account. No person or system is perfect, so it’s possible for double charges or incorrect payment amounts to appear on your statement. You don’t want to stress yourself out over payments you don’t owe! By the time you’ve finished examining your debts, you should have a clear list of what you owe, and when you owe it.
How should you organize your repayments?
Where do you start in the actual repayment process? This can feel like the biggest hurdle in the post-holiday debt process, because it might seem like you have a big mountain ahead of you. Unfortunately, you can’t go much further along until you actually start making a dent in your debts, so it’s time to do some organization. First things first, it’s very important to make minimum payments on all your debts. Some people make the mistake of focusing solely on their high-interest debts, and neglect their other payments. While high-interest payments are big weights you’ll want to lift off your shoulders, ignoring other debts will result in late penalties that will sink you further into debt. It’s better to make the minimum payments on everything, rather than a large payment on just one thing. If you have the financial ability to pay off larger debts AND make the minimum payments on everything else, go for it!
Making changes to daily spending habits
While you’re dealing with post-holiday debt, you also want to make sure your current and future spending habits don’t make your finances worse. Of course, you can’t stop spending altogether! Mortgage payments, groceries, and utilities are all essential, after all. However, you can make some adjustments to your everyday spending habits if necessary. Think about your “extra” spending. Maybe you tend to fall victim to sales in your favourite stores. Perhaps you like to pay for everything with your credit card. Making a couple tweaks here and there can help you avoid placing yourself into further debt. For example, when you head out to run errands, make a specific list of everything you need, and stick to it! If an item isn’t on your list, don’t purchase it, even if it is on sale. Further, consider making purchases with cash or debit cards. This will prevent you from owing payments with interest later on, and it might also encourage you to spend less.
If you have financial plans or goals for 2023, you’ll want to ensure they don’t interfere with paying off your holiday debt. Maybe you want to do some home renovations, go on a big vacation, or even purchase a new home. These are all expenses that require careful planning, but they shouldn’t take priority over debt repayments. Large expenses like these might worsen your debt situation, so it’s important to plan ahead and create a savings strategy. Focus on saving up for big purchases instead of taking them on right now, so when the time is right you will have the finances to support them, and hopefully little to no debt.
Is it time to contact a broker?
Is your post-holiday debt causing you major financial stress? It might be time to get in touch with a mortgage professional. Brokers like myself can help you break down your debts and determine what the best solution is. This might take the form of a refinance or debt consolidation, both of which are processes made much easier with a broker’s help. The best way to start dealing with holiday debt is to let a professional be part of the solution.
If you have any questions about your mortgage or debt, get in touch with me!