Holidays are supposed to be carefree and relaxing, but a happy year-end break can soon turn to misery if, by the beginning of January, you realise you’ve spent too much enjoying yourself and are starting the New Year in financial difficulty.
Benay Sager, chairperson of the National Debt Counsellors’ Association, says debt counsellors typically see a spike in enquiries in January and February.
“The combined economic impact of successive lockdowns, escalating inflation and interest rate increases have negatively impacted most people’s earnings. In addition, many companies are not in a position to pay an end-of-year bonus to staff members.
“Then there are the usual contributory factors. Real income continues to decline, having shrunk by 24% over the past five years. And for the perfect storm, factor in that because most people are paid early in December, that paycheque needs to stretch for up to a month-and-a-half until the end of January.”
In addition, year-end financial pressures can be exacerbated by New-Year expenses such as children needing new uniforms and stationery to go back to school. This can result in people taking on even more debt.
Sager says a little forward planning can go a long way to preventing the January blues. He suggests the following:
Don’t get caught out: If you get paid early remember that you will have to stretch your salary until the next paycheque. Allocate money for normal living expenses before you decide how much to spend on gifts and entertainment. Plan accordingly by factoring in that your existing debit orders will still run in December. If there isn’t enough money in your bank account to pay debit orders, then you might fall behind in your payments and have your credit report affected; worse yet, you may be penalised with extra costs by your financial institution.
Resist overspending: If you get paid early in December and are lucky enough to get a bonus, you could suddenly have a lot of money in your account. Although you may feel flush, resist the temptation to splurge. Think first about your financial commitments.
Get help if you need it: After a difficult year most of us need a break and some time to recharge. That’s not going to happen if you spend the holidays worrying about how much you owe or how you’re going to make ends meet in January. A reputable debt counsellor, such as a NDCA member, will do a free assessment, advise whether you can benefit from debt counselling and explain how the process works. Having someone to help you can take away a lot of the anxiety associated with dealing with debt.
Sager says that it is critical to keep up debt payments over the holidays. NDCA data shows that on average it takes up to two years for consumers to catch up on payments that are missed in December. In the current economic climate, it is likely that now it will take even longer.
“While we advise everybody to keep up their debt repayments over December, we recognise that for some this will not be achievable. If that is the case, get help from a reputable debt counsellor. Don’t delay as it could negatively affect your credit record and if you wait too long even debt counselling may not be an option.”
BUSINESS REPORT