In your efforts to embrace the spirit of giving, it’s all too easy to overspend during the holidays. Somewhere between your first eggnog of the season and the last Boxing Day sale, you went way over budget. In the heat of the moment, when you’ve snagged an amazing deal on the SNES Classic mini console, charging one more thing on your credit card doesn’t sound like a bad idea. It does, however, when you get your bill a month or two later. If you’re still facing down a huge pile of debt several weeks after the holidays, you wouldn’t be the only one. The average Canadian is struggling with debt just like you. Let’s take a look at holiday spending reports to see the true damage of the season, so you can discover some simple ways to undo it.
2017 Holiday Spending at Odds with Advice
Most financial experts suggest the average shopper can stand to spend around one percent of their pre-tax income on their gift budget, yet most disregard this rule of thumb when faced with holiday deals. The consequences of ignoring this advice varies. Those with more expendable income will naturally have more to spend on the holidays and can afford to go over the suggested one percent. Those with their finances tied up in mortgages, auto leases, and personal loans will have less, so they won’t be able to accommodate overspending as well as their more financially free neighbours.
The latest PwC Canada holiday outlook survey estimated the average Canadian spent over $1,507 on the festivities despite already drowning in debt, and 41 percent of this number (a whopping $617) was used on gifts alone. This average is only in keeping with the one percent rule if someone is making $61,500 a year or more. For those making less — or for those with their cash tied up in previous debts — this average could spell trouble for their credit card account balances.
A Three Step Plan ToUndoing the Damage Done by Overspending
If you greeted the New Year with considerable credit card debt to your name, you need to make its repayment the focus of your 2018. The idea in its totality may be hard to consider — paying off your credit cards is a weighty goal! A secret of those who regularly achieve their New Year’s resolution is making your goal specific. In other words, you should break down your resolution to pay off debt into smaller, more manageable steps and apply a timeline to order your tasks.
Your first task should be to table a budget, so you know how your money is moving. Once you can track each dollar that goes in and out of your accounts, you can start to pick up on any bad spending habits that simultaneously add debt while preventing you from paying off your debt according to your timeline.
Use your budget as a reference to cut out any unnecessary purchases you make over the course of a typical week. Popular yet damaging purchases like daily lattes, takeout, and other impulse buys should be struck from your budget, but don’t stop there. Eliminate any unnecessary spending, like data overages on your cellphone bill, utility hikes as you crank your furnace instead of using a blanket, or paying for brand name household items over their cheaper, off-brand alternatives.
Once you eliminate these drains on your budget, you can use the newfound cash in other ways. Use most of it on those bills with the highest interest, as they have the greatest chances of growing thanks to compound interest. When your credit card accounts are in repayment, don’t use them on purchases because this will only increase the debt you owe on these high interest cards. Without savings, however, you may think you have to rely on these cards to pay for necessities you didn’t budget for.
If you face a financial emergency before they’re paid off, you can borrow money and avoid charges on your credit card. Research the different opportunities available by heading online. You can compare the financial assistance offered by banks and personal loan companies to see which one works bestyou’re your situation. That way you can cover those essential bills or repairs without jeopardizing your repayment plan.
Making a budget isn’t easy but neither is following the strict limits on your spending. These are essential steps to tackling your debt and eliminating it once and for all. Make time in your schedule so you can create a budget. Don’t let your inexperience stop you; there are tons of resources online like this one to help you create an effective financial plan. Once you have this tool in hand, you can start targeting your credit card debt, and with a lot of determination, you may just pay it off in time for the next holidays.