It’s that time of year when we have turned the corner into the new year and need to get our finances back in order as soon as possible.
Here are 3 “Don’ts” which will help you to get you off to a quick and effective start mindful that its always better to put up your sails before a storm than during one.
1 – Don’t ignore the damage
Get down to the details quickly and formulate an action plan for the new year. Work out the damage before the statements arrive at the end of the month. The earlier you start the more prepared you will be before your next salary.
You are going to need to sacrifice somewhere to make up for the over indulgences of the festive season. You will find them by creating a detailed budget and splitting your expenses into “must haves” and “nice to haves”. The area of “nice to haves” will need to be scrutinised ruthlessly and there you will find the extra cash to pay off the debt. Target the credit card first as this is probably the most expensive debt.
You need to allocate towards interest and the amount owing. You should try to payoff as much of the principal debt as possible.
2 – Don’t borrow anymore
Don’t borrow more to get out of debt. It’s like trying to fill up a bath with the plug out. Put the plug in by shelving your credit card for a while and turn up the taps by squeezing out extra cash from your expenses.
Obviously this will also mean that no more “nice to have” spending for a while. You can review this only once you are back one your feet.
3 – Don’t dip into your savings and investments as a quick fix
Work out how much you can allocate over time to getting rid of your debt. Stick with the program until you are out of the water. Set a realistic time frame realising that debt robs you of potential savings. The sooner its behind you the more you will have to compound and create wealth for your financial freedom into the future.
Ideally, you should save towards a contingency fund during this year to ensure that you don’t fall into the same trap of “catch up” in 2017. A great challenge for the new year…whereby you will have cash for the next festive season and avoid the stresses of the next years January Blues…..
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This article first appeared on 702 : Damage Control for January Blues