The Cost of Christmas Debt
How do I get out of Christmas Debt?
We know how it goes; you wake up on Boxing Day holding your head. You’ve got the “never drinking again” vibe going on; you try and go through the events of the night before, like the movie Hangover.
Ok, so you’ve not offended anyone; Christmas has been great this year.
Well, so it may seem...
That is until the New Year's Eve party is a distant memory and your Barclaycard bill lands on your doormat.
Stay calm
“I don’t remember spending all of that”, you think to yourself, and then the panic sinks in. You have no idea how you’re going to pay this bill!
This isn’t the time to panic.
Staying calm is the first step in the right direction if you want to manage your finances after Christmas.
The Real Debt Guy
Once you’ve calmed down, the real work can begin. January is the perfect time to review your financial situation, even if you aren’t in financial shock.
Here’s how to go about it...
1. Assess your situation
Look at your debts. How much is due now, and how much is due in February? Credit cards, in the majority of cases, have at least a 30-day grace period for payment. Some cards may even have up to 56. Check how long you have to pay each credit card bill (if you have more than one). That way, you can prioritise the ones due earliest and maximise your cash flow.
2. Prioritise your spending
Unsecured debts are non-priority expenditures, meaning they are less important to pay than other specific bills. Yes, we know this might be hard for you to get your head around, but it’s true; even the lender will tell you this if you ask them.
In short, you should avoid prioritising non-priority debts over items like:
- food and water
- mortgage/rent payments,
- utilities
- council tax
- secured debts
- child support/maintenance
Understanding the difference between priority and non-priority debts is crucial. We have seen many people cause themselves bigger problems in terms of health and financial well-being simply because they did not understand this distinction. By being informed, you can avoid more significant issues and make better financial decisions.
We're not saying you should not pay anything towards your unsecured debts. We want you to understand that they are the first area you can trim in terms of payments if things are tough financially. Our Token Payment Method (TPM) can help you with this. If you’re worried about your credit rating, our article How important is your Credit Rating when struggling financially will help quash this concern.
3. It’s good to talk
Communication is key; we can’t stress this enough. If you are struggling, tell your creditors that you are (in writing). The good news is you are protected by section 7.3.5 of the Financial Conduct Authority Handbook, which means you have options like making Token Payments towards your unsecured debts. But it is your responsibility to tell the creditors you have a financial issue! Please do not ignore the situation and hope it goes away as most of the time it won’t.
Do not suffer in silence; a problem shared is a problem halved. Remember that.
The Real Debt. Guy
If you know someone you can trust, talk to them about your situation. If you don’t feel comfortable speaking to anyone around you, we’ve got you covered! You can join our no judgment, no creditor or debt collector bias community by clicking here. Be sure to read our article about the importance of speaking about financial difficulty once you’re done with this article. You can easily get to it by clicking here.
4. Review unnecessary spending
It’s surprising how few people do this - check for unnecessary expenditure. It could be an Audible or Netflix subscription you are no longer using or membership payments to a gym that you’ve found reasons not to go to; yes, you know who you are!
Subscriptions are typically overlooked as the amounts can be small and less noticeable than larger payments. Print off your bank statements and be ruthless. If you’re not using it, lose it from your expenditure.
The only expenditure that should be left after this exercise is anything essential to you. If you need Audible or Netflix for your mental well-being, keep it! The same applies to items like a gym membership. You have to decide if you are 100% going to start using it or if you're going to start next week, which turns into next month, which turns into… Well, you know how it goes.
5. Can you get it cheaper?
Compare your costs! Are you paying more than you need to? Think insurance, weekly shops, utilities and the rest. We know that sometimes you can’t be bothered to go through the process, but if you’re worried about money in January, you need to bite the bullet. You may be pleasantly surprised when you discover how much money you can free up by doing this exercise.
6. Out with the old in with the new
Christmas is the time for giving, receiving and, oh yes, clearing out. Be honest, are you a hoarder? If you are, this is the time to change the game and evoke your inner hustling skills by selling all the old items you no longer need. Yes, we mean all of them!
Again, it’s about being ruthless; you know deep down if you need or will use an item, so don’t keep it for keeping sake. Selling items you don’t need is a quick way to bring in an injection of cash to help you through this tough time. Also, don’t underestimate the value of your items; you might think, “No one will buy that”. Just remember, one person’s trash is another person’s treasure.
Don't forget to read The Real Debt Guy's final thoughts below!
The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.
