The tree’s down, the ugly sweaters have been put away for another 12 months and the New Year’s Eve hangover has subsided. But what about the hangover from your holiday spending?
Many of us overspend at this time of the year, but you don’t need to dread the arrival of every credit card bill. These easy-to-follow tips will have your finances back on track in no time.
Keep your head out of the sand
Science has conclusively proven that ignoring your holiday debt won’t make it go away. Instead, it’s much better to take a deep breath, rip open your bills and work out how much you owe.
Once you know the exact figure, you’re back in control. Work out a mini budget that includes exactly how much you’ll need to pay off every month to get it down to zero. Here are some ways you can speed up the process.
Stick to the essentials
Cutting back on non-essential spending is the first step. For the next couple of months, reduce your unnecessary spending as much as possible, so you have more cash available to pay off debt.
Budget a small amount for non-essentials and withdraw it in cash. We tend to find it harder to part with cash than paying with a card, so this tip can help you to be more disciplined and stick to your budget.
Stay away from temptation
It was Oscar Wilde who said, “I can resist everything except temptation.” If you can relate, make sure to avoid situations and places where you might make unnecessary purchases. Keep away from the January sales unless you’ve already budgeted for an essential item.
Avoid the mall and when you go grocery shopping, draw up a list and stick to it. Look for weekly deals at your local store and buy enough food so that you won’t be tempted to dine out or order take-out. This will limit your unnecessary purchases and maximize your available cash for debt repayment.
Make some extra money
Finding ways to bump up your income can really help in paying off debt quickly. Look at selling anything you no longer need. Most people’s homes and garages are full of unused belongings that could sell for a good price on Kijiji or Craigslist. You’ll not only pay off debt faster, you’ll also make your home tidier and get a head start on your spring cleaning.
Think about getting a temporary second job or ask for extra shifts at work. If you put all of your extra income towards your holiday debt, you’ll pay it off much faster.
Debt consolidation could help reduce your stress
If holiday overspending has just made your debt situation even worse, you’re not alone. The average Canadian has $22,000 in non-mortgage debt and the holidays can make the situation even worse. If your debt is starting to get out of control, it could be time to consider debt consolidation. This is the financial technique of paying off all of your high-interest debt (like credit cards and unsecured loans) with one, low-interest loan.
The idea is to lower your interest payments and monthly outgoings, while making a plan to pay it all off.
Your debt consolidation options
The table below shows the various options available and compares both the interest savings and the monthly payments. For the purposes of this illustration, we look at debt of $20,000 and quote average interest rates at the time of writing.
Consolidation options for a $20,000 debt
Paying off your holiday debt with a reverse mortgage
If you’re 55 or over and own your own home, a great financial solution that can help with debt consolidation is a reverse mortgage.
You can take out a loan secured on your home without having to make any regular payments of principal or interest. You only pay off what you owe when you decide to sell or move out. And the cash you receive is tax-free.
Contact us at 1-866-522-2447 to find out how you can use the CHIP Reverse Mortgage® to get your holiday debt off your back.
* Interest-only payments
** Interest and principal over 10-year amortization
*** Interest and principal over five-year repayment term
**** With a CHIP Reverse Mortgage, you don’t have to make any payments until you sell your home or move out. Interest costs quoted are for year one.
