Dig your way out of December debt
By Georgina Guedes
December is awesome! We take time off work. Some of us are lucky enough to get Christmas bonuses. We go on holiday. There’s Christmas, the beach, lilos, ice-cream, and the best thing about it is that it’s all FREE!
Oh, no, wait… It isn’t, is it? Not really. No, not at all. But somehow, as the clock strikes five on 15 December, it’s as if all the threads of common sense and frugality that have kept us together for the other 11 months of the year suddenly snap and we head into the holidays without a thought for our bank balances or our budgets.
Eat out every day at overpriced seafood restaurants? For sure. Pop into every seaside shop with shell necklaces and funky sarongs and buy loads of beachware? Why the hell not? Presents for everyone? Of course! Five course Christmas dinner with turkey AND ham for the whole family? You betcha!
The money in your bank account, credit card and your other credit card dwindles pretty rapidly, and then on 31 December, all your usual debits go off, and it’s safe to say, you are entering the new year financially on the back foot.
If you are not this person, well done. Go away and do a fun spreadsheet while priding yourself on your advanced budgeting skillz. If you are like this, read on. I have trawled common sense, the internet and my friends and family to come up with the best tips for getting out of the December debt hole. Here are some ideas:
Accept that behaviour change is required
According to most sources, one of the first things you have to do to get out of debt is accept that you have to do things differently. This isn’t a huge surprise. If the old method worked, you wouldn’t be in this mess. So don’t go into the process of imagining that there’s a neat trick that will get you out of debt without you even noticing; go in determined to do whatever it takes.
Listen to conventional wisdom
If you pay your credit back at the minimum required repayment, it will take you YEARS to get rid of the debt and cost you a fortune in interest. So the trick isn’t simply paying back what you are required to, and not going into any further debt — it’s paying back MORE to get you out of debt faster.
If you have debts in multiple places, the internet tells us that the best way to pay them back fast is to use either the Snowball Method or the Avalanche Method. In the Avalanche Method, you identify the debts that are charging you the highest interest, and pay extra to pay those back first. In the Snowball Method, you pay extra into the smallest debts to get rid of those first. Either way, you’re filling the debt hole faster.
Move in with your folks
My sister-in-law wanted to buy a house but was worried about starting to pay back a massive bond when she and her fiancé already had a pretty significant credit card debt to deal with. So they moved back in with my mom-in-law. They didn’t freeload, but they paid her a flat fee for their room and food, and over a year, they paid the rest of their earnings into their credit card and wiped out their debt. And now they have a lovely new house. So that worked.
Take a month off
No, not a holiday — take a month’s break from spending. Whittle your needs down to essential expenses only, and withdraw from public life. Eat broccoli. Watch whatever’s on TV. Reduce your water and electricity consumption EVEN MORE. Do crafts with leftover Christmas wrapping paper with the kids. And put all that extra money towards paying back your debt.
Find a way to make more money
As if getting back to work wasn’t enough of a hurdle after the holidays, now you are required to find even more work for yourself! (Told you this wasn’t going to be easy.) If you have a talent for cooking or baking, you can try taking orders for lunches or treats at the office. There are also lots of ways to earn extra money with your cell phone (check out Money 4 Jam) in your spare time. Or if you get paid by the hour, you could ask for overtime at the office. Sell your unwanted possessions online. And make sure that any extra income goes straight into that credit card.
Now here’s the kicker…
One of the reasons that people get into such terrible debt over the December holidays is that they haven’t saved for it all year long. This means that not only should you try to dig your way out of a debt hole in 2016; you should also try to build a little savings mountain at the same time, to stop this happening again.
It ain’t easy, but cling to the notion that if you can get it right this year, you’ll have established a healthy financial habit that will serve you well for the rest of your life — and next year it will be easier. The alternative is taking on more and more debt with each passing year, until you win the lottery or go into debt counselling — whichever comes first. Good luck.
Photo via pexels.com.
Originally published at blog.22seven.com on January 21, 2016.