Get your finances back on track after the holidays
4 steps to get your finances back on track after the break
In all the excitement of a brand-new year, people across New Zealand are creating New Year’s Resolutions. The idea of a new year is so freeing! It is a chance to start over, fix past mistakes, plan a new future, and make this year even better than the last.
A New Year’s Resolution is a goal that people hope will last an entire year, many centered on improving the quality of life. Some think that as many as 83 percent of Kiwis make some sort of resolution, but according to international research from Forbes (which we think would also apply to NZ) only about eight percent actually achieve or keep their resolution for the entire year!
Along with health- or fitness-related resolutions, financial resolutions are near the top of most people’s lists. During back-to-back Christmas and New Year’s holidays, people can spend a crazy amount of money on all sorts of things. Many might hit a stage where they think, “Oh dear! I/we really need to get back on track financially!”. It brings up the question, what does it actually look like to set goals and get back on track after an expensive holiday season?
Step 1: Review Holiday Season Spending
One important step to getting your finances back on track is to figure out how much you spent during the holiday season.
Sometimes it is difficult to keep track when you are in the midst of the hustle and bustle and the rapid succession public holidays. It all flashes by so quickly and hundreds of dollars can be spent along the way. Now here you might be in January wondering what the heck happened, especially if you were stuck in lockdown just prior to the ‘silly season’.
If you plan ahead and set aside money throughout the year to spend during the holidays, well done. However, if you are like most Kiwi’s and may have had to hit the “Financial Panic!” button, here are a few basic steps to figure out your finances for the new year and how to make plans to avoid the same spending extravaganza next holiday season.
So now that the dust has settled (hopefully!), it is time to start picking up the pieces and putting your finances back together.
If you don’t normally stick to a strict budget, it’s time to go back through your bank account or read through your receipts to start adding up expenses. A careful review of your actual spending can give you a great idea of what might be expected next year. Don’t forget to factor in the anniversary weekends at the end of January or early February.
Make Notes for Next Year
By the end of your tracking, you should have a number for how much you spend on each holiday over the last few months:
Regional anniversary days & Labour Day
You might also find it helpful to break it down into subgroups, such as presents, travel, food and drink, and so on. Once you have tracked all your expenses and split them into categories, write it down in your budget! ! It is up to you how this is done. Some people prefer paper-based systems, others use Google Sheets or Excel, and others use apps (applications) or free online budgeting websites. Whatever your system, the key is to keep a record and get prepared for next year!
Step 2: Analyse your Bad Debts (including Credit Cards) and Make a Plan to Pay it Off
Today, most people don’t save up ahead of time for holiday spending and instead rely on credit cards, store cards, or Buy Now Pay Later (BNPL) alternatives to make holiday purchases. If used unwisely, these methods of spending can have dire consequences such as high interest or penalty rates, which is often called “bad debt”.
If you used any of these methods to make holiday purchases, it is time for a plan to pay it off fast! (And then a plan to avoid getting into bad debts again next year).
Make Extra Repayments
So long as there are no early repayment penalties, always pay more than the minimum balance to get rid of this debt as soon as possible. Plan out your fortnightly or monthly budget so you know exactly how much extra you will have, then pay as much as you can each fortnight or month until the debt is gone! In some cases, this might mean you have to pause other spending by limiting yourself in other areas like entertainment or eating out, but it will be worth it to get rid of the nagging expense of a credit card or other bad debt repayment each month.
Whatever your plan is, make sure you stick to it. Getting ahead financially is about making many small decisions and applying them consistently over a long period of time.
Step 3: Start Saving for Next Year
Now you should be perfectly set up to do this after following steps one and two!
Using the total you have determined in step one, you can now plan ahead to save that much throughout the entire year, noting any expected adjustments. The simplest way is to divide the total needed on your summer holiday by ten. While there are twelve months in the year, doing it this way can give a little extra to meet any issues that will pop up from time to time, and alleviate any anxiety about not having enough as the holidays draw close. The dollar amount you get after this simple mathematics calculation is how much you should set aside each month.
If you have trouble saving money, try this tip: Set up a regular holiday payment into a savings account. Each payday, have a specified amount go directly into an account set aside for holiday spending. The money can be automated to be taken out before you even get to see it and you’ll always have enough spending money when the holidays come around.
Regardless of how you choose to save up for the holidays, January is a great time to start so you can avoid the trap of swiping the credit card or falling back on BNPL next year!
The Bottom Line: Get Back on Track Financially After the Holidays
If the holiday season has put your finances over the edge, sit down with your family or spouse this month to track your holiday spending. Analyse your credit card or BNPL purchases (if you have any) and make a plan to pay it off fast, so you can finally begin planning to take some of the stress out of next year’s holiday season by saving all-year-long.
Now that sounds like a New Year’s Resolution to stick with!