New Year – New Debt?

The New Year Is Here And Many Will Have To Tighten The Financial Belt

Especially in the current climate, the month of January will see plenty of households upand down the country begin tightening their belts a bit to help with, what for many is an inevitable overspend, during Christmas. Going into 2024, this year has the added difficulties of inflation and the cost of energy continuing to overshadow everything – not least the added complication of interest rate hikes which have hit many home owners (and renters) particularly hard – so for those households and families who had already cut their cloth and tried to rein in expenses to ensure meeting bills and obligations did not become potentially a bigger problem, it could be a very difficult month indeed.

However, there are a number of relatively simple things that people can do quickly to put themselves on an improved footing as future months tick by and whilst the likes of ggbet can be a fun distraction, they will never be a solve for this topic.

For those with multiple debts, but meeting the minimum payments, focusing any additional repayment that you can on the debt with the largest Annual Percentage Rate (APR) makes all the sense in the world, and will save you money on an interest front in the long term. However, for those with larger balances (whether loan or credit card) a balance transfer to a zero percent deal would bring more immediate rewards. With your biggest debt then no longer growing with interest for a set period of time, it means that you can then prioritise your smallest debt in an effort to clear it fully, so you can then pile what would then be spare money on another interest gaining debt – or alternatively take full advantage of your balance transfer and begin clearing that quicker.

The added bonus of being able to clear an obligation is a massive weight off the shoulders though, and a huge motivation to continue your journey to being truly debt free.

When you put the hard work into becoming debt free, it is very easy to become distracted and get tempted by the odd impulse buy or two by using the emotional argument that you deserve it. But do you really? Stop and think mot so much whether you desrv it but more importantly to ask, do you think you need it? Is it an item of clothing or a new fangled gadget that just looks nice, but is not needed and would not make a material difference to your life, or is it something that would almost be used daily and improve your circumstances?

Being in debt does not mean you should cease living – it just means you avoid spurious expenditure and avoid buying things that will simply sit in the back of a wardrobe or kitchen cupboard.

The release of being debt free, and the new found freedom that will bring is far greater than the five minutes of joy you may feel from an irrelevant impulse buy. After all, at that point if nothing else has changed in your life you are earning the exact same amount of money, but you then suddenly find yourself in the position of having all that money free – and that is then when you can make it work for you.

Depending on how you re-organise your spending on debt, with interest rates rising, and saving rates slowly following, with a bit more time and thought – especially if you are in the position of no longer needing short term debt to live on – if you can move debt to zero interest arrangements, you could look into building up your spare money in a savings account – and then at the end of the zero interest period, you not only have the money you would have reduced the balance by, but you have that extra interest and money for nothing in effect, to help get you closer to your goal.

Every small but achievable milestone that you can set and reach will bring massive palpable relief and reinforce the fact that you are doing the right thing for both you, and your family and that will aid your motivation to keep going and achieve your aims.