Festive season financial hangover? Here’s what to do.
According to a pre-Christmas survey by Finder.com.au, Australians planned to spend about $25 billion this Christmas. The likelihood though, is that they will spend more. Last year, as a nation we racked up $28 billion in spending.
This is, after all, the season to be merry. And all of that merriness is often accompanied by unplanned spending. Even the most disciplined amongst us who spend 11 months of the year keeping our goals in mind and our finances in check, can fall prey to spur of the moment buys, excessive entertaining, bargains in the January sales, and carefree holiday spending.
And this is ok. So long as you don’t find yourself in serious debt as a result.
If you are, then don’t despair. There are ways to get the damage under control sensibly and quickly, so that you don’t have the millstone of debt hanging around too far into the new year.
How bad is it?
Take a good look at the bank statements and the credit cards, and anything else you might have succumbed to like after-pay or ‘no deposit’ retail deals. Anything on a credit card or a finance plan is likely to come with high interest so it’s important that these bills get paid quickly, so you don’t rack up unnecessary fees and other charges. But be wary of the fine print too – in some cases, contracts come with ‘exit fees’ if you pay out early. That shouldn’t put you off paying the debt, but it’s something to be mindful of.
Set out a personal payment plan.
If you don’t already have a household budget, do one! Write down your income and your expenses and then figure out how much you have left over to pay Christmas bills. Even though it’s important to take care of the debts, it’s also important to try to keep your savings on track, so aim to set a small amount aside. And don’t forget to give yourself some ‘pocket money’.
Realistically, you might need to cut back spending on non-essentials like entertainment, take-aways and café get-togethers with your friends and family for awhile, but you shouldn’t deprive yourself completely. And the best way to give yourself ‘pocket money’ is in cash. It definitely feels different spending ‘real’ money as opposed to swiping a card, or popping a pin, but psychologically, it can have an important effect. Because once the cash is gone, its gone, so you tend to be more mindful of how you spend it.
If you really did over-do it, then consider ‘debt consolidation’. Debt consolidation involves combining all your debt into one single loan. Not only does this make repayments easier to manage, because rather than having several, you will have one. If you have a mortgage, you may be able to bundle the debt into your mortgage. If not, a personal loan.
You will need financial advice to do this, to make sure that it’s the right strategy, and it will only be the right strategy if you can:
1. Pay out all your debt without incurring big fees or penalties.
2. You meet your lender’s criteria for a loan
3. You can secure a loan short term at a relatively low interest rate.
If you are considering bundling the debt into your mortgage your lender also needs to approve this.
Debt can spiral quickly out of control if it is not managed wisely. What’s more, you just never know what other big expenses might come out of the blue just when you’re getting everything under control and if your savings buffer is eroded, it can be a difficult place to bounce back from.
So perhaps consider getting some professional advice. A Financial Planner can not only help you figure out a way out of your debt, but also help you plan for a healthier and more prosperous financial future. The first meeting with a planner is usually free – of both fees and obligation.
If you are in considerable financial duress, you can contact the national debt hotline.
If you’d like advice about your personal circumstances, contact us.
MoneyLink Financial Planning Pty Ltd is an Australian Financial Services Licence Holder. No:.247360
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