How to Tackle Credit Card Debt with a Fall ResolutionAug 29, 2018
Have you ever thought about making a fall resolution? Planning to pay off consumer debt is a task often pushed back to January. For parents, though, your outlook and resolve might be better coming off a relaxing summer vacation. With the energy of a new school year, getting back into a routine can be an opportunity for a new financial start. Creating new habits can be an exciting part of back-to-school.
One such resolution could be to reduce dependency on credit cards. You can make this a quarterly goal, one that you can check in on when the New Year’s resolutions hit in January. Here are a couple of strategies to get started.
- Make plans for the “above and beyond” purchases. Regular budget items like utilities, gas and groceries can be (mostly) predictable on a monthly basis. Then there are the once-a-year or once-in-a-while purchases: Christmas gifts, back-to-school supplies, vacations, car repairs and more. If these not-so-regular purchases always end up being added to your credit card balance, think about planning ahead.
Start by looking back 12 months and adding up these type of purchases. How much did you spend last year on birthday gifts, car repairs, school supplies, etc.? Divide that number by 12 and create a line item in your budget. For example, if you spent $600 last year on holiday gifts, put aside $50/month in a “holiday gift” fund. It may seem simple, but putting aside whatever you can each month for these expenses can help you avoid those last-minute credit card purchases.
- Evaluate your credit cards. Realistically, many Canadians will continue to use credit cards for the rewards they provide. As financial writer Jessica Moorhouse points out, though, it’s important to continually review your cards. Life situations change. If you’re not planning a trip anytime soon, you might be better off with grocery rewards instead of travel rewards. Maybe you’re not spending enough to need a premium card. Reviewing can help you save money in the long-term.
By trying these two strategies out, you can begin to change your relationship with credit cards over the last quarter of 2018. This can be just one part of a larger plan to help with debt relief too, one that gains some energy from your renewed outlook at this time of year.
Ready to make September your new January? In this podcast episode, our Licensed Insolvency Trustees (LITs) offer advice and tips on how to kick start your financial resolutions now.