How to cure a festive season financial hangover

Christmas-related costs are constantly climbing. Anthony Keane explains what to do now so you’re not drowning in debt.

Did you overspend on Chrissie pressies this year?

Did you double up with another spending splurge at this weekend’s Boxing Day sales?

And even if you dodged both those debt bullets, have you paid a packet for a Christmas holiday and not sure how or when it will be repaid?

Australian Bureau of Statistics figures show that Aussies have been slashing their credit card debts during the pandemic, but those numbers don’t measure the rapid rise of buy now, pay later schemes such as Afterpay and Zip Pay that are surging in popularity among consumers.

Whether it’s BNPL debt, a credit card, personal loans or IOUs to friends or family, festive season financial hangovers can linger long into the new year, but fortunately there are some simple ways to help cure them.

1. DEAL WITH IT NOW

Don’t wait until credit card statements and other bill deadlines arrive later in January.

Debt doesn’t go away if you sweep it under the carpet – it usually just multiplies.

Had a big Christmas? Deal with the financial fallout as quickly as you can.

2. WRITE DOWN ALL YOUR LOANS

You can’t chart a way out of your debt if you don’t know exactly what you owe.

Check your banking and credit card statements – online banking makes this much easier than in the past – to discover the size of each debt, the interest rate being charged and other payment terms.

3. TACKLE THE HIGHEST-INTEREST DEBT FIRST

It’s pointless paying extra money off a mortgage, which probably charges 2-4 per cent, when you owe credit card debt with an interest rate near the industry average of 20 per cent.

Any savings from extra mortgage repayments will be quickly wiped out by high-interest personal lending, so demolish that first. Interest rates have more impact than debt sizes.

4. AVOID BUY NOW PAY LATER BLUES

Buy now, pay later companies like to say they’re different than credit cards, and while that’s true to some degree they can still trap consumers in a debt spiral.

A Christmas cash hangover can result in more than a missing tooth. Picture: Supplied

Studies have found that one in five BNPL customers miss payments and end up paying late fees, which can multiply and cost more than credit card interest.

As the BNPL sector booms, there’s a temptation to take out multiple products and perform a delicate but dangerous debt juggling act.

If this sounds like you, call for help.

5. GET FREE ADVICE

Consumers worried about debt can get free financial advice from a financial counsellor via the National Debt Helpline on 1800 007 007.

Its ndh.org.au website also has handy information about household bills, debt solutions and consumer rights.

Contact your lender early to discuss debt issues, rather than waiting for them to explode. They may offer flexible repayment options.

6. DRINK WATER

Okay, so this might not affect your finances, but I can speak from experience to say that loading up on H2O before bed after a night out on the turps will make you feel much better the next day.

Similarly, avoiding summer dehydration on the financial front will be much better for your health and wealth.