Every now and again we all eff something up, we’re all human; sometimes it’s a small slip up, and sometimes it’s spectacularly bad. As part of this general messiness, it’s common for many of us to end up overspending in November, December, through the Christmas period and into the New Year. Here’s what to do if your budget got away from you over the festive season and you screwed up your finances.
I’m not saying you should be beating yourself up or feeling guilty about the situation – that sometimes makes things harder to deal with – but it’s good to accept that this is a real issue. The problem exists. Try not to be in denial about it, and most importantly do take ownership of it.
Exactly how much do you owe? Who or what do you owe the money to? What’s the interest rate, if any? You can’t take sensible, effective action until you know, so find out.
How serious is the situation?
Can you pay all the extra money off this month when you get paid? Can you tighten your belt and budget a little harder this month and next month and clear the whole thing? Can you pay all of it off with some easy access savings, then rebuild the savings over the next few weeks? If so, this is an annoying but easily fixable issue.
If you can’t answer these questions easily or make a quick and practical plan to clear up the situation, you could be looking at a more serious problem.
Get help if you need it
If you need some extra help, make sure you go to a charity or other non profit organisation. They’ll help you with support, advice and tips, and help you communicate effectively with your creditors if needed.
Steer well clear of commercial loans companies or debt consolidation businesses when you’re looking for basic advice and assistance. Try the StepChange debt help charity for unbiased and reliable information.
Make a specific plan
Work out exactly how you’re going to fix the situation. Re-draw your budget and decide how to pay off any excess borrowing, looking at amounts of money and a specific timeline. If you’re paying debts off out of your savings, work out a plan to replenish the savings.
You may also want to:
- Try a week of extreme budgeting, such as a Tenner Week challenge (good news, there’s one starting next week, with a stocktake exercise this Sunday).
- Give up a bad habit for a week, a month or longer – for example, having fewer takeaways, buying fewer clothes, or staying away from online shopping.
- Look for places to cut back in general, such as trimming your grocery bill or changing your energy or entertainment providers.
- Sell some unwanted possessions or take on some paid overtime at work to get some extra quick cash coming in.
- Switch any expensive borrowing to lower interest or interest free borrowing (if it’s something you won’t be able to sort out quickly).
Stick to the plan
Monitor your progress with an app, a spreadsheet or an old fashioned notebook, and it’ll help you stay motivated. It might not be the most scintillating thing in the world to be plodding along with, but after you’ve sorted out the financial mess there will be a sense of both satisfaction and relief.
Work out how to avoid a repeat performance
If you’ve had to dig yourself out of a hole then it isn’t exactly a whole lot of fun, so you might as well do whatever you can to avoid going back there. Time for a few tough questions…
Where did the extra money go? A few large purchases? General dribs and drabs? Christmas gift overspending? Too many Instagram-inspired impulse purchases? Catering and hosting or meals out? Party clothes? An unexpected expense such as car repairs or a broken down boiler?
Sometimes our money circumstances are at least partly beyond our control, but sometimes the problem lies with us. Work out what happened, and have a think about you might do things differently next time around. It could be a matter of changing spending habits, getting more insurance, or building up a bigger emergency fund or household expenses fund.
If it’s just the festive season itself, you might like to try saving up a little each month towards those festive expenses in 2020. That way you won’t get such a shock when the bills roll in during January and February, and you’ll be able to pick up a bargain or two during sales and offers throughout the year.