5 simple ways to tackle the post-Christmas debt blues

January 2023
Worried Couple
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The start of the new year is usually the time to look ahead. But when the post-Christmas credit card statements start arriving, and you look at your bank balance, it’s hard to avoid becoming an unwilling prisoner of your spending history. 

It’s easy to get sucked into the festive season and overspend. 

With Christmas 2022 being the first proper Christmas since before the pandemic, you may have splashed the cash more than usual. Indeed, Businesswire reported that over half of UK consumers were planning to go into debt over Christmas.

If you are in that position, it’s important to start taking steps to reduce your debt or, better still, eliminate it entirely. 

Excessive debt can become a drag on your financial position

Unless you pay off your credit card, and other unsecured debt in full each month, it’s easy for the amount you owe to rise as you suffer from the negative effects of being on the wrong side of compounding interest.

If your debt increases excessively, you could become more likely to have to resort to further borrowing, simply to cover your everyday household expenditure. 

If you only pay off the minimum each month, as well as repaying the original outstanding sum, you’ll end up paying interest on interest.

So, start taking steps to reduce your debt now. Read on to discover five practical tips to get your debt under control.

1. Have a plan to clear your debt
Start by making a note of all your unsecured debts and put a schedule in place to clear it on a monthly basis.

Having a plan in place can help lift your mood and help to reduce the stress you may be feeling. 

Make sure your debt reduction plan is sensible with a realistic timescale. You don’t want to kick the can too far down the road, but at the same time you need to be realistic about the amount you can repay each month.

Consider if you should pause your other regular savings to divert the cash into clearing your debt so that you can pay it off as soon as possible.

2. Target your debts one at a time
As with many daunting problems, it’s better to be methodical and to break it down into manageable chunks rather than try and solve it in one go. 

Target the credit card or unsecured loan with the highest interest first and focus all your efforts on clearing this. Not only will doing this save you money in the long run, but you’ll also benefit from a positive mental boost when it’s cleared.
Set up direct debits to collect and make regular repayments as soon after you get paid as possible. 

Credit card companies will allow you to pay a fixed amount each month, so make use of this facility on the debt you’re targeting. 

Also, use any additional lump sums you may receive, such as a bonus, gifts, or any tax refund towards paying off the debt.

3. Share the load with your spouse or partner
A problem shared is a problem halved, so make sure you tell your spouse or partner about the situation and the steps you’re taking to manage it.

There’s little point in you having a detailed plan in place to reduce debt if your partner is adding to it elsewhere.

A previous article about financial planning as a couple touched on this point and is worth a read. 

4. Make use of nil-rate balance transfers 
Fixed-term nil-rate offers on new credit cards can be useful, but you need to manage them carefully. It’s important to avoid using this card as another source of further borrowing.

Instead, treat it as a loan and look to repay the debt in full over the course of the fixed 0% interest term. Divide the balance by the number of months and set up a direct debit to repay this sum each month. 

Cutting the card up or putting it somewhere inaccessible – such as in a block of ice at the bottom of your freezer – can also help you avoid the temptation of using it for any impulse purchases.

5. Reduce your other expenditure
Go through all your current direct debits and see what you can cancel, even if only temporarily. Anything you cancel could free up disposable income to help target your debts.

Clearly, there will be other important outgoings that you need to maintain, but do you really still need that wine club subscription, or all those different TV subscription services? 

Also take some time to review your upcoming financial spending plans. There may be some large-scale items – such as a new car or expensive holiday – that you could adjust or defer until after your debt is under control. 

The importance of budgeting
As well as clearing your debt, it’s good to take proactive steps to stop it building up again.

The best way to do this is to get your finances under control, starting with having a clear and detailed idea of your income and expenditure.
Put together a spreadsheet of your income and expenditure. This article should help give you an idea of what to include.

With that framework in place, you’ll find it much easier to manage your money and stick to a budget each month. 

Freeing up money by clearing debt should make budgeting easier. Once debt free, you’ll also have the satisfaction of saving for your financial future rather than clearing debts from your past.
Get in touch 
If you need help or advice about how to manage debt, please get in touch. 

Email clientenquiries@lebc-group.com or call us on 0800 055 6585.

Please note
The information contained in this article is based on the opinion of LEBC Group Ltd and does not constitute financial advice or a recommendation to any investment or retirement strategy. 

You should seek independent financial advice before embarking on any course of action. All contents are based on our understanding of HMRC legislation, which is subject to change.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Think carefully before securing other debts against your home.

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