Tackling your post holiday credit card bills. 

As the excitement from the holiday season winds down, many are left to face the consequences of their holiday shopping. For many, the societal pressure of gift giving, and holiday gatherings can sometimes lead to overspending and debt accumulation. In the past year, many have been faced with the rising costs of groceries, household necessities, electronics, toys, etc., leaving them to either expand their holiday budget, or make the conscious choice to scale back.

For those who found themselves relying on their credit cards to get themselves through the holiday season may now be receiving their statements and asking themselves how they’re going to manage to pay it off with all their other financial obligations. If you have multiple credit cards with balances owed, there are a number of debt repayment strategies that you can follow to work towards debt freedom. 

Debt Snowball method - you would focus on the debt with the lowest balance owing. You would make minimum payments on all your other debts and use the remainder of your funds for debt repayment to tackle your debt with the lowest balance first. Mathematically, this method will not maximize interest savings, however, the idea behind this method is that by focusing on your smallest debt first, after you pay it off, you will get an adrenaline boost from your "quick" win and stay motivated to continue attacking your debt in order of lowest balance owing first, working your way up to highest balance owed.

Debt Avalanche Method - you would focus on your debt with the highest interest rate first; regardless of balance owed. You would make minimum payments on all other debt and use the remainder of your debt repayment funds to tackle the debt with the highest interest rate first. Mathematically, this method will maximize interest savings over the life of your repayment strategy. If your debt with the highest interest rate is also your largest debt, you must be careful not to lose motivation by choosing this strategy as it will take some time before you can shift focus to another debt.

Debt Blizzard Method - this method involves a combination of the Snowball and Avalanche method. First, you would focus on your debt with the lowest balance first to get the adrenaline boost to stay motivated with your debt repayment plan and once the smallest debt is paid off, you would then focus on debt in priority of highest interest rate and work your way down.

Debt Consolidation - under this strategy, you would use funds from a consolidation loan or mortgage refinance to pay off multiple debts leaving you with one new consolidation loan or mortgage balance to focus on. Any monthly cash-flow saved by combining multiple debts with multiple payments into one debt with one payment, could be used to accelerate payments towards the new consolidation loan or newly refinanced mortgage. If the rate of interest being charged on the consolidation loan is high (10% or higher) or involves placing a second mortgage on your property, you might want to explore other options for debt relief before proceeding. High interest rates on consolidation loans or second mortgages will lead to high payments and before proceeding, you will want to ensure this decision will not jeopardize long term financial security and your ability to meet other important financial goals.

Debt repayment is not a one size fits all plan. Deciding what strategy to use is a matter of personal preference. When deciding, it’s wise to review your month budget to determine how much money you can safely commit to debt repayment, and then choose from the above strategies. 

If you find yourself struggling to keep up with basic necessities due to your debt obligations, there are options.

If you are looking for advice, or a second opinion about your debt, it does not cost anything to talk about your options. Every financial situation is unique and viable options can differ from person to person. A conversation free of judgment and cost, is the first step to determine options for debt that make sense for you. For a free consultation, please call or text (506) 645-1814 or email jaime@tackledebt.ca; or visit www.tackledebt.ca.