New Zealanders spent over half a billion dollars over the 2019 Christmas period; a whopping $533 million of which was paid for on credit. As the credit card bills begin to arrive, many people are left with the regret of overspending. If the cost of Christmas has rolled into the new year and you’re facing a Christmas debt hangover, we have some tips to help you clear your debt.
1. Assess the damage
Whether you’ve got a hundred dollars or several thousand dollars to repay, the first step in curing your Christmas debt hangover is a clear understanding of how much you owe.
Calculate your total debt by listing everything you owe including your long term loans like mortgage and car loan. Include interest rates and any fees or ongoing charges too. Re-order your debt in terms of costs and work towards either clearing the most expensive debt first – like high interest credit cards – or the smallest debt first so you’re motivated to keep going.
Set up a budget to work out how much you can realistically afford to pay back each month. Remember that over ambitious plans to repay your debt could impact your mental wellbeing and physical health so set an achievable repayment plan and then stick to it. A clear budget will help you stay within your spending limits and help you avoid racking up any further debt.
If you’re struggling to make a dent in your debt because of exorbitant interest rate charges, consider consolidating your debt to a more favourable interest rate – talk to a Mortgage Express adviser about your options for debt consolidation to help you manage your repayments.
2. Manage your spending
Now that you’re clear on how much debt you have, it’s time to cut back on your spending. Go over your budget and decide which of your expenses you can cut out altogether or put on hold until you’ve paid back some of your debt – discretionary spending like your gym contract or magazine subscription, that daily coffee, meals out or entertainment costs. Even the smallest amount can make a difference.
Try some of these tips to better manage overspending:
- Keep track of your spending either by shopping online or using a budget tracker.
- Have a plan for how you will spend your income each month – a budget that you can stick to.
- Only use cash and avoid using credit cards – that way you can only spend what you have.
- Carry only what you need when you’re out shopping and shop with a list to avoid buying unnecessary items.
3. Save for the future
Once you have a plan in place to pay back your debt and cure your Christmas debt hangover, you can focus on rebuilding your financial future. With your debt under control, try growing an emergency saving fund with a goal of saving at least three months’ income or at the very least, a Christmas spending fund. That way, you won’t end up in debt next Christmas.
If you have questions around consolidating your debt or accessing the equity in your home to cover additional expenses like an overseas trip, a new car, or home renovations, get in touch with the team at Mortgage Express. We can help you find a financial solution to get you back on track in 2020.
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