Dealing with a “Merry Debtmas?” We’re here to help!

Merry Debtmas! This phrase doesn’t have quite the same ring as “Merry Christmas,” but unfortunately, many people have entered post-holiday debt recovery mode. As the holiday season fades away and we’re left with nothing but the bills, you may be feeling a little gloomy. More importantly, you might be a little panicky at the prospect of making all these payments. However, the good news is there are some things you can do to limit the pain of your debtmas. Between prioritizing your bills and taking advantage of your mortgage, here’s what you can do!

Face those bills

Most of your holiday bills should be rolling in by mid-January. Although it might seem less painful to put off the moment you need to open them, rip off the bandaid and lay out your bills as soon as they come. You’ll need to pay them off eventually, and besides, the longer you leave some payments, the more interest you’ll owe over time. Get the worst part over with now! Once you see all your bills, prioritize which ones you should handle first. In general, move bills with higher interest rates to the front of the queue, as well as any bills you know you can easily pay off. Paying off easy bills first helps clear things out and reduce some of your stress. Plus, tackling high-interest payments early reduces the amount of money you’ll owe down the road.

Avoid new debts or “bad” debts

While you’re dealing with your debtmas, do your best not to add on more debt that will make your situation worse. “Bad” debt is debt with no long-term appreciation or value, such as credit cards. You will never earn money from a credit card the way you might by selling a home that has appreciated in value, for example. Of course, most of us use credit cards, and that’s fine!

The key here is to not overuse them, or get any new ones, at least not until you’ve cleared your current debt. Make a point of paying off your credit cards in full each month to limit the interest you owe over time.

Evaluate your current habits

Is there any area of your life where you can reduce your spending? If you’re able to cut out any spending you can live without, this can help you stay afloat as you navigate your debt. This could be anything from eating out less to extending the life of your phone, instead of always upgrading to the newest model every year. These little cuts won’t solve all your debt problems, but they can help you store extra money away for when you need it.

Use your mortgage to your advantage

You have home equity if you’re a home owner. Can you use it to help out your debt situation?

In many cases, yes! You can consider refinancing your mortgage if you’re able to secure a lower interest rate. This will save you money on monthly mortgage payments, which is money you can put towards your other payments. Rates are still low in Canada, so refinancing now before they increase could be a good move. Plus, if you can adjust your terms so you can make bigger or more frequent payments, this will also limit your mortgage length and therefore the interest you owe. Even though a mortgage is also a form of debt, it’s “good” debt, meaning it has value. Your home will likely appreciate in value, so you can use your equity to your advantage if your merry Christmas has turned into a merry debtmas.

Considering debt consolidation?

Debt consolidation is an option for those whose debt is beyond some tweaks to their daily habits or credit card payments. When you consolidate your debt, all your debts are rolled into one monthly payment, all with the same interest rate in one credit facility. This includes your mortgage, as well as any other debts. How does this help you? Often, debt consolidation uses lower interest rates, and it makes it easier for you to track what you owe. You can save on monthly payments and handle them with more ease. Keep in mind this will lower your credit score in the short-term, so you should consult a broker before deciding on this move!

Dealing with a merry Debtmas can be intimidating, and definitely not as enjoyable as Christmas itself. However, you don’t have to navigate the process alone! Let an unbiased mortgage broker be your guide. Brokers can help you understand your options, and what the best move is for you moving into 2022.

If you have any questions about handling your holiday debt, get in touch with us at Clinton Wilkins Mortgage Team! You can call us at (902) 482-2770 or contact us here.