ARTICLES > Cleaning Up Christmas Debt.
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Cleaning Up Christmas Debt.
The reality is this, for some of us that debt could hang over us for a long time.
So, how did you go this Christmas? How’s your credit card balance right now? Maybe you’re doing okay but you have a friend or family member who is now struggling with debt. Getting out is not always a quick process but it can be done if you have a plan you stick with. Here’s a strategy you can use: 1] Make escaping debt a priority. Debt has become a way of life for many New Zealanders. It’s easy to get into and, sometimes, easy to live with. But it does not lead to financial freedom. Decide that you will pay off this debt as soon as you possibly can, even if it means making some sacrifices along the way. 2] Work out what you can do without. To achieve your goal of repaying your debt as soon as possible, you may have to make some short-term sacrifices. Maybe you only buy coffee twice a week at work instead of every day. Maybe you don’t by that weekly magazine for a little while. Maybe you don’t go out for dinner until the bill is paid. Whatever sacrifice you make, it will be worth it to be out of the stress of credit card debt. And, in the long run, paying back that debt it is good financial sense. 3] Pay off more than the minimum. This is the biggest mistake people with credit card debt make. They believe that, by paying the minimum payment required each month the debt will quickly disappear. Well, it will eventually disappear, but it will be a long and costly process. The most basic rules of personal finance are these: if you want to maximise your spending power: don’t go into debt and, pay off any debt you have as quickly as you can. It almost always makes better financial sense to use savings to pay off debt than it does to live with debt while having money in the bank. 4] Don’t add any more to your credit card. The temptation is always there. “It’s only a few dollars,” we tell ourselves. All those few dollars add up. And when 20% interest is added to that, we are just prolonging our time in debt. 5] Set a goal. Having made the decision to be debt free; and worked out where you can economise; and calculated what is the most you can repay each month; and determined not to add anything to your card, set a date at which you can be debt free. 6] Celebrate. Plan a celebration for the day you pay off that debt (just don’t make it a horrendously expensive celebration!).
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We all do it – we use our credit cards leading up to Christmas thinking we’ll quickly pay off the amount owing as soon as we get back to work in the New Year. Problem is, for many New Zealanders it doesn’t happen.
