Merry debtmas once again! Dealing with your holiday debt

Welcome to January, and we wish you a merry debtmas! This doesn’t quite have the same ring, but it’s the reality of many Canadians as we enter the new year. After the surge of holiday spending and indulging, it’s very common to discover you collected some debt during the festive season. If this is the case, don’t panic! While debt can seem scary and overwhelming, in many cases you can handle it on your own with some strategic planning. Budgeting, payment plans, and a willingness to tweak your habits can go a long way in your journey towards becoming debt-free. Here’s how to get started.

Lay your bills on the table

First things first, take a deep breath and lay your bills out on the table (or on the screen). For many people, this is the hardest part, because it means it’s time to face your debts head on. However, you won’t be able to get rid of your debt if you don’t know how much you have! Plus, the longer you leave your debts unpaid, the more interest you will owe in the long run. Take some time to examine what you owe, at what interest rates, and what timeline you have. You might want to immediately tackle the highest-interest debts first, but be sure you’re not neglecting your other payments! It’s most important to meet the minimum payment requirements of all your debts before pouring extra effort into anything. Otherwise, you could be charged a fee for late or missed payments. You must also make a point of making your payments on time to avoid further penalties.

Reevaluate your current spending habits

Most of us spend more than we normally would during the holiday season, and we don’t tend to splurge in January the way we might in December. Still, it’s a good idea to take a look at your spending habits to see if you need to make any changes. If you have a habit of constant overspending, you should consider creating a budget that will hold you accountable and help redirect your money towards paying off your debts. If you generally have good spending habits, and just need a boost in the short term, you can consider making some temporary tweaks. For example, little things like cutting back on your luxury spending can help you get ahead of your debt. It’s all about comparing how much you need to repay with how much you can contribute at a time.

Steer clear of new debts

This goes without saying, but try not to add onto your debt while you are paying off your merry debtmas! This can make it much harder to catch up on your payments and become debt-free. There are often lots of post-holiday sales in January advertising great deals, but do your best to avoid them. Odds are, you don’t need what they are selling, and you will just be putting yourself further behind on your payments. If possible, you should also hold off on any planned expenses such as a new vehicle or loan for a home renovation. Sometimes, it’s hard to avoid large expenses such as these if your car breaks down, for example. However, keep yourself focused on your existing debts as much as you can!

Take advantage of your home’s equity

If you’re a home owner, you might be able to take advantage of your equity to pay off your debt. You may be able to refinance your mortgage to access some extra cash flow, which you can use to help make your debt payments. Many home owners have built up significant value in their property, depending on how long they have owned it. Be sure to chat with your mortgage broker about this option to see if it might be worth it for you!

Dealing with a merry debtmas is rarely fun. The good news is that with a well thought-out plan and an openness to making some adjustments, you can put yourself in a strong financial position. The sooner you can pay off your holiday debt, the better a start you will have to the new year! Feel free to reach out to us at any point to discuss your options, and happy 2025!

If you have any questions about your mortgage, give us a call at Centum Home Lenders! You can reach us at 506-854-6847, or get in touch with us here.