The holidays can be a joyful season. They can also make a solid dent in your bank account or worse, on your credit card. To help you get through the financial headache that comes with the holidays we’ve put together some tips.
Tips during the holiday
Tip 1: Review your budget
Take a look at your budget before purchasing anything for those on your nice list. If you don’t have one, it’s important to make one.
If you need to dip into debt, perhaps it’s time to re-think how much you’ve set aside throughout the year. Use this time to reconsider avoidable purchases you could forgo for the next month or two. Do you need an expensive eggnog latte every morning or will a regular coffee do for a little while? Can you sit out on a couple of holiday parties to save money on last-minute gifts and potlucks?
Tip 2: Avoid credit card
The interest rate on a credit card is usually around the 19.99% mark. Just imagine, for every $100 gift you buy on your credit card, it’ll cost almost $120 in the end if you don’t pay it off right away. So, if you have other kinds of credit, like a loan or a line of credit (LOC), use those instead. It’ll save you money in the long run because the interest rates tend to be much lower.
Post-holiday damage control tips
Tip 1: Schedule your debt payments
If you had to make all those gift purchases on credit then ask yourself two things:
- How much debt did you accumulate?
- When would you like it to be paid off?
Those answers will tell you how much you’ll need to set aside to pay off your holiday debt.
Let’s say, for example, after the holidays you’re carrying a $1000 balance on your credit card. If you want to pay it off in 2 months, you’ll have to make $500 payments per month–around $250 a paycheque. If you schedule $250 every two weeks to automatically transfer to your credit card it makes it easier to part with that money.
Tip 2: Move debt around
It might seem silly to pay off debt with other credit but it can make a difference to your financial health in the long run. If you bought $1000 in gifts with your credit card, at 19.99% interest, that’ll cost you almost $1200 if you can’t pay the balance on time.
If you have a LOC or a loan at 7% interest and you use it to pay off your credit card, it’ll cost you $1070. That’s a $130 saved by simply moving money from one place to another. If you don’t have a loan or LOC already available, give us a shout. We’ll see if it’s the right option for you.
Tip 3: Lower current loans
If you already have a loan, it doesn’t hurt to ask your lender if they can help make some breathing room. They could potentially lower your payments by extending your term or lower your interest rate. Refinancing is an avenue to explore especially if you have a car loan. A quick chat with your lender could help you pay less in the long run.
Need help creating a realistic plan to pay down your debt? We’re here to help. Let’s chat.