Christmas is round the corner, which means parties, celebrations and fun. While celebrating the carnival with gusto and bonhomie, we often neglect to consider our finances. This is once a year celebration, so we leave no stone un-turned to welcome Santa Claus. Studies have revealed that more than 75% people find that they have blown their budget post Christmas leading to rollover or borrowing more money to keep head above water.
The average credit card bill estimated to be £350 which, when added to existing debt, means a typical Brit has started 2019 owing about £750 on their credit card, according to a study. This might be very difficult to pay off if you are living from pay cheque to pay cheque. It is important that you take your financial life under your control. Here is the 7-day plan to get your personal finances on track post Christmas.
Day 1: Make your financial goals
People get into debt because they spend more than their budget. Christmas means arranging parties and enjoying holidays. It is natural that your expenses will be more than your budget. The rule of thumb says that you should make your financial budget beforehand so that you know where you need to stop spending money. Christmas is just round the corner that means the higher likelihood of going out of budget.
Financial experts suggest that you should set a financial target and make your efforts to achieve it. If you do not want to get into debt post Christmas, ask these questions first:
- Why was your financial life disappointing last year?
- What do you need to change to avoid experiencing that bad thing again?
- How can you build financial safety?
- What financial condition you want to achieve post Christmas?
Look back your past mistakes and accordingly decide your goals.
Day 2: Create your financial statement
Once you have thought about your financial goals, the next step is to create a financial statement. This statement will help you get complete information about your current finances. When you note down all of your income sources along with expenses, you will have an idea about your net worth. It says a lot about your financial wealth. Your spending plan, which is the next part of 5-day plan, depends on your net worth.
Day 3: Create a spending plan
A spending plan is a must whether you have stashed away some cash for Christmas expenses or you are living from paycheque to paycheque. First and foremost, you need to create a budget to know your regular expenses. This will include your food, rent, debt payments, utility expenses and the like. During Christmas, of course, your expenses will add up. If you do not want to fall into a predatory debt cycle, you must prepare a spending plan beforehand.
Look at your spending habits over the past several months and find out areas where you can cut down. You can use the money that you save from those areas during Christmas. If you want to accomplish your financial goals, you should strictly adhere to this mantra: earn more and spend less.
Day 4: Check your credit report
It is likely that you may need to take out a loan to fund your Christmas expenses. Before you apply for any loan, you should peruse your credit report to make sure that it does not consist of errors. Remember that your score can be less-than-perfect even if you never committed a default on payments. A poor credit rating can lower your chances of getting a loan signed off on. Whether you apply for Christmas loans, you must evaluate your credit report to ensure that it does not consist of errors.
Another reason to look over your credit report is to understand how likely you can get a loan at lower interest rates. In case of bad credit, you might be denied to apply for Christmas loans, and in this situation, you are left with only one option – very bad credit loans. A spending plan must leave some room for loans to fund your expenses and it is better if you know in advance how much you will pay in interest.
Day 5: Look out ways to whittle down debt
If you have high-interest debt like credit card, guaranteed payday loans or bad credit loans, try to repay them on time. Each default attracts late payment fees and interest penalties. It is better if you have paid off all these debts before Christmas starts. If you have any long-term loan such as mortgage, you should make a spending plan taking into account your mortgage payments.
The bottom line
It is natural to fall short during Christmas, but you can manage to take finances under your control if you strictly follow the 5-day plan. Start working on this plan today.