What to do if you overspent at Christmas.
Despite the best laid plans and the best of intentions, budgets can tend to go astray at this time of year for any number of reasons … the festive spirit, spur of the moment entertainment, impulse buying in the post-Christmas sales … these all have the potential to wreak havoc on our spending habits.
You’re not alone
Many people spend 11 months of the year making solid financial progress, and then find it all goes awry the minute the holiday season begins. By January, when the credit card bill arrives, shock and despair set in. Figures show that for average Australians the post-Christmas credit card debt is more than $1500.
The good news is that with some sensible strategies you can get that credit card bill under control and put a savings plan in place.
Assess the damage
Take a deep breath and write down all the bills you have to pay – this includes regular payments like mortgage/rent, utilities, insurances, necessities such as food, and other household spending. Make sure you count your credit card or store card debts.
Make a plan
After you have noted your expenses, write down your monthly income and work backwards, taking off the various amounts you need to pay each month. With any left-over funds, decide how much extra you can comfortably pay off the high-interest debts – these will be the credit cards and the rent-to-buy and other retail schemes. Despite the ‘no deposit’ and ‘interest free periods’ these types of debt usually attract more than 15% interest which can accumulate very quickly, especially if you don’t attend to the debt and keep using the cards. It’s a good idea, if you can, to pay more than the ‘minimum’ amount owing each month.
The next step is to decide what you can reasonably put into savings. Even though you have accumulated some debt, try to keep your savings on track.
Lastly, allocate yourself some pocket money. The best thing you can do while you clear your debts is get this pocket money amount in cash out of the bank and spend only the cash – don’t use your cards while you’re in Christmas recovery.
Give the cards a rest
Soon you’ll notice just how different it feels to spend $100 cash, as opposed spending via an electronic transaction. Be tough on yourself – when the spending money is gone, don’t give yourself more until next pay day. If you want to buy something you don’t have the cash for then consider layby, plan your spending, or simply wait until you have enough money to purchase what you want.
Debt can quickly double if it’s not dealt with
If you’re in serious debt, talk to your bank about consolidation or other short-term, low interest options, like for example an overdraft facility or a personal loan that might help you to pay off the high-interest credit cards so you don’t keep racking up highly expensive debt.
There’s no way to sugar coat the solution. If you’re in greater debt than you want to be, then you need to take steps to rectify the situation.
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