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So, you had a holly, jolly time over the holidays and maybe, just maybe, you went a tad overboard with the spending. Hey, it happens to the best of us and you are definitely not the only one heading into January in a deficit as a result. Without being too hard on yourself, let’s redirect and implement these 5 tips for steering back on course and bouncing back quickly.
Before we begin, it’s best to have a realistic idea of where you are financially. You won’t be able to fix the situation if you’re not aware of the severity. You're going to have to pull up all your credit cards and accounts in order for us to face the music together.
Assess the damage
If you dipped into your savings or credit cards to add the razzle to your December plans, clearly write out how much you owe and make a note of the relevant interest repayments. There are many ways to tackle debt so it’s important to find a strategy that works best for your financial situation. If you are unsure where to start, here are two beginner-friendly options: the Debt Avalanche method, and the Debt Snowball method.
Debt avalanche: Start by paying off high-interest debt first to save on interest in the long run while still making minimum payments to the smaller-interest debts.
Debt snowball: Begin by paying off the smallest balance of debt for quick wins and motivation, while making minimum payments on all the other debts.
Go with what feels most comfortable to you. If you used your savings, try to increase your monthly savings over the next few months to get them back to where they were. Especially if you dipped into your emergency fund. No, sangria is not an emergency. Even in the European winter.
Streamline your savings
As you head into the next month, set up a direct deposit so that your savings go straight out of your account and you’re not tempted to soothe your feelings with another gingerbread latte. Listen, gingerbread lattes are great, but so is being financially stable.
If you have several savings goals, you could also look at setting up a few savings accounts (be sure to check the monthly costs) and allocating your paycheck accordingly. Bonus points for using a high-yield savings account which will accumulate added interest.
Detox for the finances
Sometimes, when we've spent a little too much, it can be a good idea to give our finances a fresh start. One way to do this is by having a "no-spend month." Doesn’t sound riveting but hear us out.
You take a break from buying things that aren't absolutely necessary. It works best if you set strict rules, like focusing on essentials only. Define your rules by identifying the necessities, plan your meals in advance, avoid temptations like shopping malls and social media influences, seek out free entertainment, and marvel in tracking savings.
A no-spend month can also help reset your thinking about what you truly need to spend money on. For example, for the holiday season, you might have absolutely needed a new outfit or two for your social engagements. However, in January, you take the time to go through your wardrobe and find fantastic pieces you had all along.
Think of it as a way to take a step back and reevaluate your spending habits while also saving some cash.
Allocate every penny in your budget
A recent trend in the budgeting space is to allocate every penny of your paycheck into various categories, ensuring that every penny you earn serves a specific purpose.
Once your budget is created, you still have the flexibility to move funds around, however, the idea is that you’ll think twice about moving funds from something important to something more trivial. It will also help you to realise your priorities and recover the damages.
Review and adjust
While you’re sipping on something at home in your no-spend month, now is as good a time as any to put together a hypothetical budget for next year’s holidays. While it’s all still fresh in your head, jot down the biggest costs and try to put together a budget you can work toward saving for over the coming months.
Things to plan for might include travel, the costs of hosting a party, gifts, extra gas bills for the heating, and perhaps an outfit that will make you feel extra good. Remember, budgeting isn’t about living skin and bone, it’s about prioritising, planning, and thinking ahead.
Final thoughts
The holiday season's spending spree may have left you feeling a bit financially drained, but don't worry, you're not alone in heading into January with some financial adjustments to make. By following these five tips, you can bounce back quickly and even get prepared for next year's festivities. With a bit of discipline and a fresh perspective, you'll be well on your way to bouncing back and regaining financial stability in no time. Cheers to a financially strong new year!
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