It’s the end of January and you’re afraid to look in the mailbox. December’s shopping frenzy is catching up and outlined in glorious black and white, is the evidence of last month’s buying spree. There’s no point in moaning about it or rationalizing why you felt Uncle Harry would love that expensive cashmere sweater (to which he is allergic).
The truth is: you overspent and it hurts. Now, what are you going to do about it?
Credit counseling agencies recognize the end of January as their busiest season. Despite good intentions and great plans to “have a simple Christmas this year,” social pressures, guilt and other factors result in credit overindulgence in December, which shows up like an bad headache in January. Here’s some advice from the experts on how to get back on track:
1. Freeze!
Drop the cards. Stop using your credit cards now. Right now. Continuing to add to your debt will not help the situation. Live on cash until you get back in control. It’s much harder to part with cash than flash a card – you’ll see. And by cash, we don’t mean using a debit card. Put those away too.
2. Open the Mail
Ugly as the truth may be, you need to know exactly where you stand, in order to make a plan to move forward. People grossly underestimate the amount of debt they carry, so step one is to get a clear picture of what you owe. Make a chart of balances and interest rates. Observe how little of the suggested minimum payment goes towards paying off the balance. Facing the truth about your situation is hard, but something you need to do.
3. Embrace the “B” word
Yes, budget. Simple changes like taking a lunch to work, or making your own to-go coffee at home rather than getting a take-out are easy and cost effective ways to cut back. Prove this to yourself by adding up the cost of convenience for a week – you’ll be horrified at the double digits you’re sipping away. And don’t stop there – be realistic about other free-form spending. Where else can you cut back? Embrace low cost ways of having fun with family and friends.
4. What’s your interest in this?
Consider using a lower interest rate financial product to pay down higher rate balances. For example, lines of credit rates are substantially lower than premium credit cards – can you reduce a high interest balance by using your credit line? Another option is to open a new, lower rate account and transfer your higher rate balance onto it. Note: this is not a reason to test out the new account by making a purchase or two – it’s to take control of your finances. Make sure you close the old account and cut up your cards.
5. Ask for help
What’s worse: getting for professional help, or living day after day with constant money worries and stress? Credit agencies are discreet and confidential, and offer practical solutions to debt management. There is also a wealth of online resources you can access in the privacy of your own home. Just be sure when you’re surfing for solutions, you pick one and work it. Searching for a magical answer that allows you to keep spending is a waste of time – it doesn’t exist.
Take a small dose of comfort knowing there are millions of people in the same boat. And if you’re worried that friends will find out about your situation, quite possibly they already know or are sitting next to you, holding their heads too.
Recommended Reading
- Try this Money Quiz
- Money Mentors – for credit counselling and money coaching
- Down-to-earth advice from Canada’s own Gail Vaz-Oxlade