Christmas Debt and Strategies to Avoid the Seasonal Financial Hangover

If you’re a typical modern person of the western world, you overspend and are in debt. Want to sort yourself out? I don’t know about you, but for me the worst time of year for overspending is Christmas and come the New Year we spend 11 months to clear some debts to make room for the next Christmas.It’s a by now familiar cycle. There’s never been as much money around and, as a result, we’re spending it like there’s no tomorrow. But here are some hard facts to sober us up:Spending in December 2006 reached a record high, with of £31 billion spent in the UK on credit cards alone!More than a million credit cards bills in the UK were not paid in January as a result of overspending during the holiday season.British consumers expect to spend on average £600 each on Christmas, which households that have children pushing their expenditure up to £840.Almost half of British households do not save for Christmas and 37% of people will borrow to meet their costs and pay for it later.One third of people of people go into debt every Christmas, and 1 in 10 are still in debt by the next Christmas.
So maybe it’s time for a reality check and a few practical tips for the months ahead. You can’t just assume that you’re going to ride out your lifestyle debt on the basis of increasing your income.
If you want to get your financial circumstances sorted, here are some tips that will certainly put you on the right path:

1. Set a budget for Christmas, and STICK TO IT!. Explain to friends and family that you have finally woken up to your financial situation and would appreciate their support whilst you sort yourself out. You’ll find they will admire you for being so brave and honest. You may even start a trend for fiscal responsibility!
2. Let 2008 be the year that you eliminate lifestyle debt completely, because we could be in for a very bumpy ride. Set a target that, by the end of the year it’s gone, and that you will cease forever using lifestyle debt.
3. On a piece of paper, list out all of your debt, starting at the top of the page with the most expensive: not the biggest debt; the most expensive (i.e. how much it’s costing you to service). If you’re not sure what that is, find out. Start with the interest rate you’re paying for each debt, then how much it’s costing you every month, then what the balance outstanding is, and that’s your lifestyle debt portfolio.
4. You’ll probably find that the most expensive debt you’re paying is to store cards, credit cards and catalogue companies. Generally speaking, when you pay on an installment basis for goods that you have bought using one of these methods, you will probably find that the interest rate is somewhere between 25 and 40%. Look at the fine print in the contract and you will find the rate. And stop using credit to buy things!
5. Keep a cash diary for the month. Carry around a little notebook – it doesn’t have to be anything expensive, just an ordinary jotter – and take a note of what cash you spend every day, and that will give you a fair graph of where you’re haemorrhaging cash.
6. Look at your monthly electronic spending: your mortgage, your rent, your utility bills – ESB, telephone, all of that kind of stuff.
7. Add your cash spending to your electronic spending. That’s now your total spending.
8. Multiply your answer by 12, which will give you your total spending for the year, and then compare that against your after-tax income for the year. You will probably find that you’re on target to spend more than you’re earning, and the gap that’s there is how much you’re adding to your personal lifestyle debt mountain for the year.
9. Now split your spending into two boxes: one is your must-spend box, your necessaries: household food, heating, lighting, mortgage. You have to meet those bills. Then – and you have to be ruthless about this – you put into your optional spending box all the unnecessary spending. For example: gyms, holidays, booze, entertainment, books, magazines, non-essential shoes, clothes, gadgets, makeup, hair and beauty.
10. Now compare your necessary spending box with your net income for the year, and you should find that there’s a positive gap. In other words, your net income should be more than your necessary spending. That’s the gap that you have to work with, and that you use to attack your debt mountain as well as some form of optional spending, because you have to live!
11. Go back to your page and consider what kind of debt that is at the top of the page, you can drop to the bottom. In other words, bring them into the areas of finance that have the cheapest interest rates.
12. You avoid, obviously, pouring your lifestyle debt into your mortgage. That’s a bad idea.
13. The cheapest form of finance for lifestyle debt that you have on credit card is available by moving your credit card balance and becoming a ‘rate tart’. This is where you shift your credit card balance to credit card companies that are offering 0% rates for six months. So now you’ve eliminated the cost of servicing interest on your credit card balances.
14. Take your credit card and disable it. Take a scissors and cut horizontally just under the magnetic strip, so that you have a credit card that you can’t use.
15. Look at the cost of your loans, and I would say talk to your local credit union or bank, to see if you could consolidate your loans into one, low-cost, short-term loan. And you should be looking at net interest rates of not more than 9%.
16. Look very carefully at how much you’re spending on insurance, particularly life and health insurance, and check the market to see if you could get the same cover at cheaper prices elsewhere.
17. Look at your communication costs – your telephone costs, your cable costs, your internet connection costs. That’s another very substantial area of expenditure: particularly mobile phones. Check the best deals on the market and look too see if you can get cheaper rates.

It’s going to take some time, a lot of patience and restraint, but to get clear of debt, you must be strong and determined. A lot like kicking alcohol or drugs. However, there is a radical method to cancel debt that requires you to think without the normal societal blinkers. You can eliminate debt and clean up your credit without delay by using financial knowledge that normally stays within the realm of the bankers and the very rich.Today, that knowledge is available to members of The Ultimate Entrepreneur, if you’re ready to be an independent thinker visit, http://www.wealthfreedomfighters.com and break free now!