Don’t wait for the new year, resolve to have a debt-free DecemberDec 02, 2015
Have you thought about your new year’s resolution yet? While we often don’t put a lot of thought into making New Year’s resolutions, even less effort is made to stick with them—for 19 per cent of Canadians, those resolutions didn’t even last a full day. And coming in at Number 5 on the Top 10 Resolutions for 2015was “Spend Less, Save More.”
Why wait until January?
Rather than resolving to spend less in the future, think about some small changes that can make a big difference, starting today. For instance, you could:
- Have a debt-free December by setting a holiday budget and not adding to your debt this month
- Start paying off one of your credit cards
- Create an emergency fund for future savings
By thinking about these and other financial goals, you can reduce stress and debt during the holiday season. Here are a few things you can do to have a debt-free December.
How to avoid taking on holiday debt
Although Canadians plan on lowering their holiday spending by 7.5 per cent this year, the average Canadian still intends to spend $875 during the holiday season. And in Canada, credit card debt has already hit a two-year high, just before the start of the holidays. This might be a good time to consider the old adage, “It’s the thought that counts.”
With that in mind, you can look for fun, free activities to do with your family over the holidays. Attending a community concert or going ice skating at the local rink are two ways you can have fun without breaking the bank. And the best way to avoid holiday debt is by paying in cash. One CPA Canada executive suggests that carrying around larger bills, like 50s and 100s, could even help convince you to spend less—because no one likes to make change for a 50.
2 ways to pay off credit card debt
If you’ve set the goal to start paying off one of your credit cards this month, but aren’t sure how to begin, there are two wintery methods that could work for you.
The debt snowball suggests that you focus on paying off your smallest debt first, while making minimum monthly payments on your other debts. The satisfaction that you’ll feel when that first debt disappears will help you tackle the next-smallest debt on your list.
The debt avalanche method focuses not on the size of your debt, but on the rate of its interest. While making minimum payments on your other debts, focus on paying off the debt with the highest interest rate first. Not only will you save yourself from some of those exorbitant interest charges, but once that larger debt is gone, you’ll find it’s all downhill from there.
Do you have enough set aside for emergencies?
It’s been suggested that you should have three to six months’ salary set aside in the case of an emergency, such as losing your job, emergency home repairs—or even buying a new laptop after your old one bites the dust. But this isn’t easy for all Canadians; many already live paycheque to paycheque, and with the high cost of housing in certain cities, cutting back simply isn’t an option. If that sounds like you, this could be a good time to consider credit counselling. A credit counsellor might be able to restructure your debt, saving you money on interest charges, which would allow you to start saving. Even putting aside a few dollars a month will help build that security blanket to protect you in trying times.
What are you prepared to do to have a debt-free December? Join the conversation on Twitter using the hashtags #DebtFreeDecember #BDOdebthelp