Many ways to crack Christmas debt
Christmas debt has arrived for many of us. But with the right money moves, you can quickly shift it.
Here are a few tips proven to work for anyone with $1000 to $10,000 of personal debt.
This includes anyone with balances owing on credit cards, short-term loans, buy-now-paylater and/or sums owed to family and friends.
The good news is it’s easier than you think to start the new year with an actionable repayment plan to reduce your debt.
Consider a transfer of your credit card balance
Paying 0 per cent interest (rather than 20 per cent) on uncleared balances means you can pay off what you owe and not have money diverted to interest costs.
A $5000 balance dragged through 2021 at 20 per cent per annum will cost $1000 in interest alone, which is awaste of money.
Money Hub constantly updates a list of balance transfer offers to help everyday New Zealanders do more with their money and break the ‘‘pay it later’’ cycle.
Download a budgeting app
It’s hard to know how to manage your money if you don’t see where it’s going.
A number of free budgeting apps (such as Pocket Smith, Booster’s My Budget Pal, and, Westpac’s Cashnav) securely access your bank data and put everything into a diagram or chart. This really helps you cut back on things that don’t matter, so you can divert money into clearing debt.
Budgeting apps are great because just looking at their data helps you shape future behaviour.
If you don’t like to re-live card transaction statements, a budget app is a great way to re-focus.
Re-organise your debts and know your credit history
For anyone repaying unsecured loans, interest rates are, generally, dropping. For this reason, it may be worthwhile refinancing.
If you’re financially confident to repay a secured loan (and comfortable with the risk), the savings can be significant.
If you have strong credit and can afford the repayments, you can easily switch from a 17 per cent per annum unsecured balance to a secured loan with 5 per cent to 7 per cent interest.
It’s also a good idea to access your credit history. It’s free so you can challenge anything that’s not right.
The more you’re aware of, the more options you have.
Get creative with the kids
Fewer in-app purchases and more fresh air during summer are good for everyone.
The Department of Conservation’s activities for children is a great place to start, with dozens of ideas.
Best of all, cutting back on nonessentials for the kids will mean you’re getting more creative, experiencing something new and not incurring any extra debt all at the same time.
Consider supermarket Christmas clubs for 2021
You’ll have more money for special occasions over the holiday period and New Year if you make the most of supermarket Christmas clubs.
Right now, the beaches are full of tens of thousands of picnicking families. Imagine if all that food was free?
New World, Countdown and Pak ’n Save all offer their version of a Christmas club.
In a nutshell, they let you put money aside every week and get discounts of 5 per cent (or more) on anything you want at redemption time (usually December onwards).
For example, Countdown will apply a 5 per cent bonus to the amount topped up in the previous 12-month period from December 1.
This means that you can set yourself up for Christmas, New Year and all the days in between by making regular financial contributions.
Imagine prepaid food and drinks for 10 days.
With supermarket Christmas clubs, it’s realistic and I’m continuously surprised more people don’t take advantage of the deals.
Following even one or two of these suggestions will help get you over the Christmas debt mountain that New Zealand invariably faces every January.