It’s a new year, a time to set new goals and yes, tackle those holiday debts. You may have panicked a little when you received your January credit card statements, but don’t worry. Dealing with your holiday debts right away, instead of dragging it out, means you’ll be free of those debts sooner and able to tackle your other financial goals in 2018.
Here is my advice on how you can tackle your debt this January:
- Start planning
The first step in repaying a debt is figuring out exactly how much you owe. Gather all your credit cards, line of credit and loan statements and determine how much you owe on each and what the interest rates are.
- Budget and save
Creating a budget is an important first step in repaying any debt. It helps you visualize your expenses and figure out your long-term goals. If your goal is to pay down debt faster, use a debt repayment calculator to find out how much money and time you can save if you increase the monthly payment you contribute toward a debt.
You can find a budget spreadsheet and other tools on our website, debtsolutions-princealbert.ca
- Focus on your highest interest debt
Also known as the debt avalanche method, this debt payment strategy focuses on putting any extra money towards your debt with the highest interest rate, while still making the minimum payment on all of your other debts. The advantage of this method is that you will save on interest charges and actually pay down your debt faster over time.
- Lower your interest rate
If you made all of your holiday purchases with high-interest credit cards (18 to 20 per cent), consider contacting the credit card companies and asking for a reduced interest rate. If you have a good credit history this may work.
Moving your credit card balances to a lower interest rate loan may also work. Speak to your bank about the option of consolidating your debts. This will help you save a lot on interest charges and simplify your payments.
Tackling your holiday debt early on is the best way to manage it. The earlier you pay off that debt, the sooner you can get started on your other financial goals for 2018.
Keep an eye out for my column for more debt solutions. Do you have your own tips for paying down your debts? Join the conversation. #DebtSolutions #NewYearsResolution #NewYearMotivation
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