The festive season is a welcome diversion in the depths of winter, but it can leave you with a financial hangover that lasts well into the new year. A fairly frugal celebration can still mount up, and if you get carried away by the spirit of the season, you can easily spend way over your initial budget, putting yourself in a tricky financial situation. Now we are well into the new year, have you been brave enough to calculate the final bill of your festive expenses? Or are you hoping your battered finances will sort themselves out if you carry on as you are?
You probably already know this, but hoping for the best and avoiding doing the sums isn’t the way to go, and could end up costing you even more. Far better to grab the bull by the horns and see exactly where you stand. You never know, it might not be as bad as you fear; and if it is, then the only way to improve your situation is to muster the facts and take the actions required to resolve any problems.
Assessing your financial situation
If you use a personal budgeting spreadsheet, get your figures up to date, and you’ll soon see how any Christmas expenses have affected your forecast. If your budget is well-planned, you’ll have set aside a certain amount for Christmas, for example, and it’s worthwhile comparing what you budgeted with what you spent so you can update for next December. If you don’t have a personal budget – which is a valuable tool that you would do well to start using – reconcile your bank statements, credit card bills, and other expenditure to get an accurate picture of your current funds and debts.
Taking action to improve your financial situation
This is where a personal budget can be so helpful because it gives you a quick way to see how well you’ll recover from any bout of overspending or unexpected expenditure. If you have a modest amount of credit card debt, you could see how much extra you’d need to allow each month to pay it off, and work out where you need to economise if necessary. Credit card debts can soon spiral when the interest is added, so if you aren’t going to be able to pay the cards off and avoid large interest payments, have a look at balance transfers to see if you could save money and buy yourself more time by juggling your debts between zero interest accounts. It may cost a fee or percentage to switch, so work out which options represent the lowest overall cost before making any decisions.
If you’re concerned about being able to repay what you owe, you could consider a consolidating loan that gathers all your debts into one, reducing your monthly repayments and giving you some breathing space. Be careful if you choose this option, and make sure the loan repayments aren’t being charged at high interest, otherwise, you won’t be any better off.
What Is a Credit Reporting Agency and Why Should You Care?
Credit reporting agencies are definitely something you should care about, because the information they hold about you could have a significant impact on your ability to get credit, including loans and mortgages, and may affect other critical areas of your life, such as being able to rent a place to live. The agencies gather data about your spending and financial management, recording the amount of debt you have plus any missed payments or other indicators that you may have problems repaying debts.
Every time you apply for any form of credit or an agreement with a financial component, the organisation with whom you’re transacting will do a check with a credit reporting agency before reaching a decision as to whether to lend to you, and if they do, what rates of interest or other special provisions should be applied. Therefore, you need to keep on top of your debts and manage your credit facilities effectively to avoid any repercussions down the line.
The most important action you can take is to find out what state your finances are in. Once you know, you can either breathe a sigh of relief, or be able to look at the best ways of managing any debt you’ve accrued and pay it off before it gets any worse. It’s always better to have the information, and take steps to resolve any problems, so if you’ve been avoiding the issue, don’t leave it any longer or you could still be paying off debts well into the year.