How to tackle post-holiday debt

This holiday season has been unlike any other. With COVID-19 restrictions still impacting our daily lives and the usual overseas travel options unavailable, we’ve taken to our own backyards to celebrate.

Even though many of the usual opportunities for spending haven’t been an option, we know that a large number of Australians will still have incurred some extra debt… perhaps by taking the entire family on a beach-side getaway or going over budget on gifts or maybe spending more on a smorgasbord of delicacies to make the gatherings extra special.

While this is definitely an unusual time, any additional spending can accumulate and impact your current and future financial situation, so it’s important to be mindful of any debt you accrue.

Facing your post-holiday debt can be a difficult and overwhelming task to tackle, but taking the right steps is vital to make sure that your financial goals are set and that you can embrace every future holiday or occasion with financial confidence and security.

We help you start this year on the right foot by sharing our insight on savings, consolidating debt and managing your finances.

The state of post-holiday debt across Australia

The state of post-holiday debt across Australia

Post-holiday debt is a common struggle across Australia. According to the findings from credit bureau Experian, more than half (51.3%) of Aussies put up to $4,000 on their credit card to pay for a holiday.

The top three reasons for Australians to go over their holiday budget were accommodation (41.09%), travel (39.66%) and experiences (34.33%).

Unsurprisingly, three in ten said they would go over a budget due to shopping. And of those who reached their credit card limit during a holiday, 58.75% were women while 41.25% were men.

These results come despite many of those surveyed recognising their holiday spending would impact future applications for personal loans, credit cards and mortgage applications.

Only 34.4% of those surveyed said they would immediately pay off holiday credit card expenditure, with the majority (27.62%) of these being above the age of 54.

Take the time to reflect

Take the time to reflect

We understand that it can be difficult to personally assess your own financial situation, but taking some time to think about what got you into post-holiday debt is crucial.

It can be easy to underestimate what you are spending, especially during the holidays when you are feeling generous and want to enjoy the season… so it’s important to acknowledge that it may be a sign to consider making changes to your financial habits. Start by asking yourself what led to the debt in the first place. Did you stray from your usual budget? Did you perhaps not make a list of specific payments and bills?

Reflecting on the causes of your debt will help you plan for the future and reduce the possibility of experiencing the same problem again.

Create a payoff plan

Create a payoff plan

Once you’ve taken the time to think about your situation, calculate your total debt and decide when you’d like to pay it off. If you’re able to cut back on spending to find that extra cash, you’ll have a plan that works for you in no time.

Another aspect to consider in your payoff plan is how you would like to pay off your debt. For example, making manual payments isn’t always a good idea if you know you struggle to remember important deadlines or if you have a hard time keeping track of your money.

Instead, set up automatic payments with your bank to transfer money immediately when you get paid. It’s best to transfer funds as soon as your paycheque hits so you don’t feel tempted by those funds.

This also means you won’t have to worry about accidentally missing a payment. Seeing that balance reduce automatically each month will motivate you to keep going and to keep saving.

Consider your debt payoff options

Consider your debt payoff options

In most cases, you have some flexibility when it comes to how you’ll pay off your post-holiday debt. With credit card debt, most people are worried about interest rates and high fees. However, there are different options available.

If your credit is in good standing, it’s worth calling your bank. Many credit card companies will negotiate lower interest rates or payment options. They have repayment options available for those who are actively seeking help to pay on time.

Another option is debt consolidation. If you have existing debt spread out between credit cards, consolidating that debt onto a single card with a balance transfer has its benefits. Debt consolidation is an effective way to get ahead of your payments without worrying about interest piling up.

Change your spending habits

Change your spending habits

Holidays don’t need to end with a pile of debt every time you unwind from the cheerful high. Make a commitment to change your spending habits this year. While 2020 certainly was a challenging year, 2021 can be full of fresh starts, so make sure one of those starts is your push towards smarter financial choices.

The cure for your post-holiday debt is to take these positive steps in your own money habits. Before you know it, that debt will be behind you, and you’ll be ready to achieve all of your financial goals with confidence.

If you find yourself unsure of how to tackle your post-holiday debt, then we recommend contacting a financial adviser for professional guidance.

To find out how First Financial can help you, contact our team today. Read more Financial Planning articles.

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