Your awesome new smart speaker and your kids’ Xbox One X aren’t the onlysouvenirs of the holidays. When you and your partner agree to spoil everyone on your list (including yourselves), the final gift of the season arrives in the mail weeks after you un-deck the halls. That’s right—despite your determination not to think about them during the festivities, your credit card bills had to come eventually.
It’s unlikely you opened your bills with the same enthusiasm your children had when they opened their new gaming system. Let’s be honest—you may be too scared to open them at all if this was an especially merry Christmas. Unfortunately, willful ignorance doesn’t work for long, so you’ll have to address your overspending sooner or later in 2018. If you aren’t sure where to start, check in with these super simple strategies to tackle your lingering holiday debt.
Rank your debts in order of highest interest
Yes, this will mean you’ll have to finally open those bills, so take a deep breath and grab your letter opener —or use your fingers if you’re feeling lucky. Though it may be hard to face the full extent of your family’s overspending, this is an essential step to paying it all off. You need to know how much you owe and where, whether it’s on Mastercard, VISA, American Express, a line of credit, or any payday loans.
debtYour next step is to prioritize your balances. Most financial advisors recommend ordering your credit card bills according to their interest rates, making sure to target those with the highest rates first. The only exception to this rule is for those financial products that don’t allow a continuing balance. In Canada payday loans have a single due date, as do charge cards. If you make use of these kinds of product, you need to make sure you pay it back in full. Otherwise, you risk earning late fees as well as interest.
Multi-task your financial responsibilities
In the age of multi-tasking, it only makes sense that you should split your focus on your finances. After all, you manage it when you jump from Netflix to your group chat to your news feed. Apply those same skills when repaying your debt. While your primary focus should be those with singular due dates or the highest interest rates, don’t forget you have other debts in your name. While majority of your excess cash should go towards your prioritized accounts, make sure you can pay the minimum payments on your remaining bills. This way you can avoid credit card fees and charges that result from late payments.
Customize your budget
You won’t know how much excess cash you have on hand to distribute between your debts without a budget, so take the time one weekend or evening to go over your finances. An effective budget tracks every dollar that goes in and out of your hands. This tally has two functions. The first one establishes your current financial capabilities as they are. The second one helps you identify ways to make any changes to free up more cash.
It does this by outlining your spending habits in the black and white of your Excel spreadsheet. If you spend enough time studying them, you can pick out those trends that don’t serve a purpose. Purchases like takeout, upgrading your cellphone when your current device is serviceable, and parking fines are just a few examples of bad spending habits you can eliminate to free up more cash to put towards your debt.
Plan ahead for next Christmas and other important holidays
Debt relief isn’t your only concern, so it shouldn’t be the only focus of your budget. In an ideal world, you should be able to contribute towards savings and other investments while paying off your debts. When faced with what you owe, you may want to prioritize credit card debt over any other financial duty. But not planning for emergencies is more detrimental to your finances than repaying debts slowly according to their minimum payments.
According to the 50-30-20 Budget method, you should split your income according to this ratio. Fifty percent of your earnings should go towards necessities, like rent or mortgage payments, insurance, and groceries. Thirty percent should go towards non-essential purchases or fun money. The last 20 percent should cover debt relief, savings, and retirement. Keep this in mind when tabling your budget. Try to put six percent of your income towards savings, in addition to debt relief.
A savings account can help pay for emergencies like household repairs or last-minute vet visits. It can also help you resist credit cards during the next holidays. If you start early enough in the year, small contributions towards your Christmas saving fund can help prepare for next December.
At the end of the day, try your best
Living with debt is no picnic. It only gets harder when you’re raising a family, but nobody said it was going to be easy. You and your family are going to have to make sacrifices as you cut down on spending. Not everyone is a natural when it comes to following budgets, so you may have several off-weeks. Don’t let yourself be discouraged. These tips will certainly help you tackle your debts, but it’s your determination that will ultimately let you erase your debt for good.
