Our losses and gains at Christmas do not always work in our favour. The holiday season is often when our budgets lose more than a fistful of dollars and our waistlines gain more centimetres than we’d care to admit.
A new year calls for a new strategy and a fresh start. There’s no better time to redress the balance. Read on to discover how to put your best foot forward for your post-Christmas financial recovery with our post-holiday budget tips.
Assess Your Post-Holiday Financial Situation
Honesty and openness are everything. If you shy away from checking your bank balance and credit card statements, you are putting off the inevitable. You will also potentially accumulate a whole lot of new debt until you face the reality of your financial situation.
Set aside an hour or so, turn your smartphone to silent mode and gather all your financial statements. Go over your outgoings with a fine tooth comb and determine where your money is going.
Use a system that works for you when making your notes. For instance, you could colour-code your spending on a spreadsheet like this:
- Blue: for essentials such as rent/mortgage, food, utility bills, smartphone data & wifi
- Green: for monthly debt repayments, excluding any mortgage payments
- Yellow: gym membership, TV/App subscriptions and insurance products
- Red: entertainment, gifts, meals/drinks out, luxuries
Calculate your total debt. This should include credit cards, personal loans or anything else you may have paid for over the holiday season.
Once you have all the figures, consider what you’d like to achieve in the new year. This might include:
- Paying off debt
- Saving for a major purchase
- Gaining more financial security in general
Set a Realistic Debt Payoff Plan for the New Year
Looking forward, list your income, fixed expenses and discretionary spending using the colour coding method or any alternative way that you find helpful. Work out what you think you can realistically set aside each month to pay down your debt.
When managing debt, focus on the parts with the highest interest rates first. These are usually credit card-related. You might also want to pay off the smallest debts initially to build confidence and give yourself some momentum.
You could consider consolidating your debts as part of your post-Christmas financial recovery plan. This means gathering your debts into one lump with one provider at a more favourable interest rate. Credit card providers are sometimes the best port of call for these types of transfers. However, beware of two key pitfalls:
- If you apply for too many credit cards, you can adversely affect your credit rating
- Avoid the temptation of more debt the instant you feel back in control post-consolidation
If debt consolidation is not an option, you could call your credit card provider and ask for a more competitive interest rate on any accumulated debt. It never hurts to ask; if you have a reliable payment history, you may achieve a positive outcome.
What Can You Do Without?
Work out what you can cut back on by asking yourself these questions:
- Do I really use all the TV services I subscribe to?
- Could I do without my morning coffee on the way to work?
- Could I set aside days of the week when I will never eat out?
- How can I stop myself from making impulse purchases?
- What steps can I take to reduce energy consumption in my home?
- Are there any ways I could shop smarter at the supermarket?
Acting on the answers to these questions is one of our top post-holiday budget tips, as it can free up a significant amount of cash to pay off debt.
Boost Your Income for Faster Debt Payoff
One recent survey concluded that more than half of Australians are thinking about starting a small business, and more than a third plan to operate a side hustle alongside their current jobs. These can be effective ways to boost your income, even if extra freelance work is for only a few months.
Additional part-time jobs and taking on overtime in your current main job are well-established ways to help generate cash to pay off debt. They also mean that you’ll have less free time to spend the money you earn.
Selling used items around the home can be as lucrative as part-time work. For instance, there’s a huge market for vintage clothing, second-hand jeans and smartphones you no longer use. Use the cash you generate as part of your debt payoff plan for the new year.
Build an Emergency Fund to Avoid Future Debt
Your post-Christmas financial recovery strategy should also include setting aside small monthly amounts to create an emergency fund. We all face unexpected bills occasionally, and it can be tempting to turn to credit cards to dig yourself out of any hole. An emergency fund built over time is a far more cost-effective alternative.
One of the best ways to get started is through automated payments that leave your bank account on the day you receive your salary. It’s wise to set aside any tax refunds, bonuses or financial gifts and add these to your emergency fund.
You could also consider setting up a dedicated holiday savings account early in the year to prepare for the next holiday season and avoid relying on credit when next Christmas comes around.
Track Your Spending
You should get into the habit of tracking your spending habits. If you’ve not done this before, you can make it fun. There are plenty of budgeting tools and Apps out there that can help you do this. First things first, you should check all your balances every day.
Once you get into a routine, you’ll likely boost your confidence and become more upbeat about your financial future. That’s because tracking your spending will give you a greater sense of control. The result can be a sense of relief and positivity, which is why tracking your finances is one of the best post-holiday budget tips around.
Seek Professional Financial Guidance
Dealing with personal finances can feel overwhelming at the best of times. It pays to consult a financial advisor such as PAC Financial, who can help you create a long-term strategy for managing debt, saving for the future and planning for life’s big financial goals.
Book a consultation with one of the PAC financial team as part of your post-Christmas financial recovery plan today.
