Money: How to Recover After the Holidays
By Kira Vermond
It’s the middle of January, the holiday decorations are all taken down, the gifts have finally found homes, and the family is getting back into their regular routine. Just one final festive tradition remains: opening that January credit card bill.
Not your idea of seasonal cheer? You’re not alone. After months of using your credit cards to pay for the year’s hot toys, teacher gifts, holiday nibbles and dozens of last-minute extras, No wonder January’s financial reality check brings all that glee to a sudden halt. In 2014, one-third of Canadians spent more on the holidays than they intended — by an average of $463 — according to RBC’s 2015 Post-Holiday Spending Poll.
But how does an already cash-strapped family climb their way out of holiday debt?
There are ways to manage repayment which will help put you on the right financial track .Some are as simple as returning unwanted gifts. If they sit untouched for weeks, maybe taking them back wouldn’t be a bad idea. Here are 6 tips to help you break the cycle!
Get real about your payments
Sit down and calculate the damage; looking at real numbers can take the fear out of the equation. Then decide on a goal. If you want to get out of doubt before next December, you must make more than the minimum payment each month. Here’s proof: If you put $1,000 in purchases on your credit card with an 18% interest rate, and only make the minimum payment of two percent each month (most credit cards require you to make a monthly payment of between two and three percent of your balance), it would take you eight years to pay it off. Plus, you’ll pay $863 in interest. If, however, you were to throw $100 a month at the bill, you would be debt-free in 11 months and pay only $92 in interest.
Bring in more money
Between daycare costs, outrageous utility bills, and everyday expenses your current budget just can’t stretch far enough to make the extra payments. Find a way to bring in some additional cash that might help solve some of your financial problems. Have something to sell? Christine Hicks, a mother from London, Ontario, takes part in year-round mom-to-mom sales. The group rents community space for a day and then loads it up with items for sale. Clothing and gently used toys are a big hit, says Hicks. Go to Facebook and search “mom to mom” plus your community’s name to find one taking place near you, or check Kijiji or community notice boards. You could also drag out other household items collecting dust in storage
Don’t forget tax refunds, work bonuses and salary increases. Rather than treating them like windfalls, use that “found” money to pay down debt.
Save up to pay up
In the RBC poll, most people surveyed planned to get their debt under control by cutting back on day-to-day expenses such as groceries, phone plans and entertainment.
Food is a great place to start, as it’s one of the few expenses largely under your control. Think twice before buying items placed at eye level at the grocery store. The best deals are often found on bottom shelves.
The best way to save money on food? Don’t eat out three nights a week and eat what you buy. Studies show that Canadians waste a whopping 40 percent of their food, worth $27 Billion each year, with just over half being ditched by households. Dig around the pantry and deep freezer. You may be surprised at how much you’ve purchased and forgotten about.
Eat a big lunch before going to a matinee (less expensive than an evening movie) to avoid costly snacks. Get the family outside and enjoy free winter activities like skating, sledding and hiking. “We come home, make hot chocolate with whipped cream and the kids are really happy,” says Jaime Damak, of Sherbrooke, Quebec.
Know your triggers
Everyone has a different reason to overspend during the holidays: excitement, guilt, that desire to see your kids’ faces light up, and keeping up with the Joneses. Tackle these triggers after the holidays, picture the toy you’re about to buy lost in a heap on the floor. Try to figure out your motivation for purchasing: Are you buying something meaningful or just more “stuff”? Andrea Kotekar, of Toronto, uses this tactic: “Instead of telling myself I can’t buy it, I tell myself I can buy it, but later. Nine times out of ten, the desire disappears.”
Stop the cycle
How will you handle next year’s holiday spend-fest? Start saving now, so you don’t have to pay by credit next year. Putting away just $10 a week adds up to about $500 by December. To slash debt quicker pay the bills with the highest interest rate first, and the minimum balances on the rest. Once the first debt is paid, roll that money into repayment on the next one. Repeat.
Don’t do it again next year
You should have a seasonal savings plan: * Set a holiday budget and include all expenses like entertaining, alcohol, tips and stocking stuffers; * Consider home-made gifts for teachers and neighbours; * Place cash into separate envelopes for each person on your list, and stop when it’s gone; * Be honest about what your child actually needs. A mountain of gifts for a one-year-old? Maybe not.