Did Christmas hit hard?
A loan is very convenient to get all the things you need and want for Christmas. However, a loan can send you in a never-ending debt circle if you don’t have a strategic and reliable plan to pay it off. Furthermore, if you don’t manage to pay off your debt in time, it can hurt your credit score, making it hard for you to access finance when you need it most.
Are you suffering from Christmas’ huge expenses, and find yourself struggling to pay off your debt? Don’t worry too much, we have collected the 6 best tips to help your Christmas debt recovery and get you on top of your finances again! Craving More Time? Learn about working from home here.
#1 Know how much you owe
First off, you need to make sure you know all about the repayment plan for your debt and how much you owe in total. If you have several debt accounts, make sure you account for all of them. Remember to add on the interest rates and other fees that come with it to see the whole picture. The interest rate is a fee you pay above the original amount borrowed, and if you have taken out more than one loan it can be hard to keep track of all the costs. Having loans can be expensive, but if you manage to gain control over it, make a plan and stick to it, you can put yourself in the driver seat once and for all.
You can gain back control of your loans in a few easy steps.
- Obtain a copy of your credit report at AnnualCreditReport.com.
- Make a list of all of the active accounts on your credit report.
- Call the creditors or sign in to your online accounts to find out your current balance and write down how much you owe on each of the loans.
- Add up the total amount you owe on each loan.
#2 Consolidate your debts
If you are paying more than one loan it can be hard to maintain track of all the payments, especially if you are making the purchases manually and not with direct debit. A debt consolidation loan is a personal loan you can take out to combine your existing credit accounts. By taking out a debt consolidation loan you can combine all the loans you may have into one, and only focus on one repayment instead of several. By consolidating your debts you can eliminate the separate fees and interests and gain better control over the repayments.
However, before you decide to take out a debt consolidation loan, you must decide if you can afford the repayments and if the loan will help your financial situation rather than make it worse. A good tip is to make sure the interest rate and the fees of your debt consolidation loan are lower than your original debts.
If they are, go for it!
#3 Make a monthly budget
A part of gaining control over your expenses is to make a monthly budget. A monthly budget can help you keep track of not just your debts but also all the other spendings. This can help you visualise your financial status, your spending and your expenses, making you prepared and organised for what’s to come. It is important to know exactly when you need to pay your debt payments, because if you miss a payment, fees may apply and make your debt grow even more.
Plan for both expected and unexpected expenses with a monthly budget. Set exact dates to pay the bills you know will come like the electricity bill, the phone bill or rent. Another tip is to look at your statements and see approximately how much you spend on food, clothes, memberships and other everyday expenses. Add up all the monthly costs and see the exact amount you are spending in a month. This will enable you to also plan for unexpected expenses that might show up. You never know when your car needs a repair or you need a trip to the dentist. If you know how much you spend during the month, you can put off some money for such events.
#4 Avoid unnecessary purchases
A good way to recover from your Christmas debt fast is to avoid unnecessary expenses. We all need to pay the monthly bills and we have things we need to buy every now and then. However, there is a lot of temptation out there and things we want, but definitely don’t need. Always think twice before you purchase something. Avoid spontaneous purchases you know you will regret later.
Make food at home
Although it is nice to go out to eat, it is way more financially wise to make the food at home. Make a list and plan your trips to the grocery store and only buy what you need. Make healthy, homemade food at home to bring to work or school. Of course, this doesn’t mean you should stop eating out entirely. Instead make it a special occasion, one in which you can look forward to and remember.
Don’t let the sale poster trick you
Spending money on things on sale is not saving money, it is avoiding spending the full price. Buying things on sale is a good way of saving some money if you really need the item, but don’t let a big red ‘SALE’ poster trick you.
Have a shop stop
Decide to stop shopping for a month. Of course, you need food and all those other necessary things, but you may not need new clothes or new decorations for your home. Challenge yourself and have a shop stop for a while! It is good for your wallet, your future self will thank you.
Cutting costs and being aware of your spending is a great way of saving not just a bit of coin but a lot! Suddenly, you have saved up for your debt bill when it knocks on the door.
#5 Stop using your credit cards
Spending money on things with a credit card seems convenient and tempting, but when your credit card bills show up in your mail and from then on your Christmas debt recovery begins. Remember that the money you spend with a credit card is not technically yours, and you have to pay it back at some point. This can cost you a lot if it’s not paid on time and the fees start running.
One of the most effective ways to avoid using your credit cards is to not bring them with you. Rather use your debit cards or cash instead. The difference between a credit card and a debit card is with a debit card you only spend the money you actually have.
#6 Cancel costly memberships you don’t use
Don’t have time to watch Netflix or Stan, but you pay for your membership each month?
Do you go to the gym every now and then, but certainly not enough to make use of the gym membership? Cancel the memberships you don’t use and save the cash!
Regular exercise can relieve stress and is generally very good for your health. We don’t recommend stopping working out by any means. However, you can work out smarter! For instance, use nature as your gym. There is nothing like a run in the nice weather or a walk in the park. There are also a lot of great free apps to get you going and that is suited for workouts anywhere.
More about Nifty
Like what you’re reading? At Nifty we’re the trusted name everyday Aussies turn to for personal loans. We’re ready to give everyone a fair go at finding the finance they need, whether they have bad credit or are receiving Centrelink. Our team looks beyond just your credit score when assessing your application. Rather we’ll look at your overall relationship with money and your bank statements. So what are you waiting for? Apply now!