New Year Start Fresh Eliminate Your Debt Heres How

Cut back on holiday season spending

Prepare for the New Year by not increasing your debt burden over the holiday season. Gifts, travel, entertainment and boxing week sales are all outside the normal course of your monthly spend. These will hit you when you get your credit card statements in the early New Year. It’s only natural that holiday spending is going to happen, but minimize what you can.

Prepare a monthly household budget and stick with it

If you aren’t already keeping track of the money coming in and going out of your household, now is the time to start! Start tracking your average monthly income and expenses on paper. Create a spreadsheet for yourself or use an app available online so you can identify where your money is going. See what you can cut back and what is left after you have found room to compromise. If you don’t have enough money to cover all of your expenses, you may want to consider cutting back on non-essential items or taking on a part-time job.

Stop Using Credit

If you are having trouble making ends meet or are having difficulty making your monthly payments, take a break from using any available credit that is available to you so you can tackle managing the debt that you already have.

Pay Down Existing Debt

Take a look at all of your debt including balances, interest rates and minimum monthly payment amounts. Prioritize the debts to maximize your ability to pay them down and off as soon as possible. This may mean paying off the smallest balance first or tackling the account with the highest interest rate first, while continuing to make at least minimum monthly payments on the rest (more if you can).

As you pay off one debt, shift that monthly payment to another. Identify how much money you have in your budget to contribute towards your debt and start implementing your payment plan. If any extra money comes into the household through overtime, such as a bonus or tax refund, try to put it all towards your debt so you can be debt-free even faster!

Set up a savings / emergency fund

If you can, start to set some money aside in a separate envelope, jar or savings account for emergencies. Do your best to budget in a way that allows you to automatically transfer a sum from your checking account to a savings each pay period. For instance, if you get paid twice a month, $100 per pay period will add up to $2,400 over a year. However minor, unforeseen things happen to us all (usually at the worst possible time) and typically cost money to resolve. Having an emergency fund is a great way of avoiding taking on any new debt.

The holiday season can be an especially difficult time for accumulating debt. If the amount of debt you are juggling seems unmanageable, we can help! Contact your local MNP Ltd. Trustee for a free, no-obligation financial consultation. Together we can discuss your options so you can make a fully informed decision as to what is the best route forward for you in the New Year.