From Black Friday and Christmas splurging to year-end escapes, the festive holidays can be a tempting time financially.
Besides the lure of shopping, come December many of us are on holiday, entertaining and enjoying ourselves. Before we know it, it’s time to go back to work and get the kids off to school, and we find ourselves playing financial catch-up.
There are other factors that contribute. Some companies pay employees in mid-December, so salaries have to stretch a month-and-a-half until the end of January and many employers cannot pay full 13th cheques or year-end bonuses, so there is limited cushion to cover the extra festive-season expenses. In both cases, many people turn to loans to make up the difference.
Then there are the post-holiday expenses such as school uniforms, fees and transport, which escalate the financial pressure and can result in people taking on even more debt.
This isn’t anecdotal, but a cycle that repeats itself year after year. It’s a treacherous tide, but with some planning you can swim against it. Benay Sager, chair of the National Debt Counsellors’ Association says they see a spike in debt management queries every January and February, which has intensified over the last two years as higher inflation and interest rates have exacerbated the situation.
“Consumers find themselves in a pinch and borrow money to make it through until they get paid. The problem is that the repayments on these loans add long-term pressure on households which are only just keeping their heads above water. One unexpected expense or emergency can then result in serious financial difficulty.”
Plan ahead: If you get paid early in December, remember you will need to stretch your salary until the next pay cheque. Allocate money for normal living expenses for the full period, factoring in January expenses, before you decide how much to spend on gifts and entertainment. Also, consider your existing debit orders will still run in December. If there isn’t enough money in your account to cover these, you might fall behind on your payments and your credit score could be affected. Your bank may also penalise you by charging additional fees.
Be considerate: If you are lucky enough to get a bonus, you could suddenly have extra money in your account. Although you may feel flush, resist the temptation to splurge. Think first about your financial commitments and consider saving or investing some to provide a financial cushion for the New Year.
Get help if you need it: After a difficult year, most of us need a break and time to recharge. That’s not going to happen if you spend the holidays worrying about how much you owe and how you’re going to make ends meet in January.
A reputable debt counsellor will do a free assessment, advise whether you can benefit from debt counselling and explain how the process works. Having someone to help you can take away much of the anxiety associated with dealing with debt.
It is critical to keep up debt repayments over the holiday break, as it can take up to two years to catch up on payments missed in December. In the current economy, it’s likely that now it could take even longer.
“We do recognise that this is not possible for everyone. If that is the case, get help. Delaying can negatively affect your credit record, put your assets at risk of repossession and if you wait too long, debt counselling may no longer be an option.”
