No one wants to start the new year with a pile of credit card bills. Here's how to avoid the holiday debt hangover.
It’s silly season as the Festive decorations are already up in store. Before you find yourself caught up in the frenzy and start blaming your credit card bill on the hypnotising effect of the jingle bells and bright lights, ask yourself: Is it worth it? Do I really need this? Can I do without it? Is it worth blowing your budget for the coming year for a quick moment of happiness?
We are all guilty of a little overspending during the holidays, which is why it is important for you to know how to deal with the consequences of your holiday spending. There is no point in playing the “if only I hadn’t bought that” game – you need to face the facts or you’ll get your fingers burnt.
You don’t need to overspend to enjoy the festive period and you should try to plan your shopping season as best possible to avoid the holiday debt hangover. If you know that every festive period you tend to overspend, you should include a savings amount in your annual budget. If you have you not saved at all, the best you can do at this point in time of the year is to evaluate your situation and set up a plan to get you through the festive season.
Take a look at your current debt status
Grab a pen and paper and add it up. Exactly how much do you owe and how much will you need to pay back in the next two or three months? Take your income and minus your planned expenses (be realistic!) and determine how much you have available to pay back to all of your creditors. Remember, you need to stick to the credit agreements you have with your creditors or else your credit profile will be negatively affected.
Get a copy of your credit report
Each month that you miss a payment you will be charged fees, and it will be reported to the credit bureaus. In order to see what creditors can see on your profile, you need to view your report with My Credit Check. This will also help you set up your budget, since your report will show you what your total monthly credit expenses are.
Set a realistic budget and plan for new debt
Set yourself a new realistic budget that includes a repayment plan for any new debt, should you plan to take out a loan or buy on your credit card during the festive season. Make sure that your New Year budget can handle the debt you make over the festive season. Remember to include the monthly service fees charged on each of your accounts, as well as interest that is added.