In a few days’ time, the first set of post-Christmas credit card bills will land with a thud. January marks the month when the holiday debt shows up and when New Year’s resolutions are still fresh in everyone’s mind. This is the time you should take action, be proactive and make 2015 a very good year for you from a financial perspective.

If your plastic took a real pounding for Christmas or you went on a Boxing Day or January sales spending spree to take advantage of some deals, now is the time to take a hard look at your finances. The good news is that there are some tried and tested financial hangover cures.

If you have an existing balance on your credit or store card, the simple fact is you shouldn’t. Unless you are on some no payment plan, your credit cards should be paid in full each month whenever possible to avoid the high interest costs. Otherwise, those “deals” you so actively shopped for become a financial nightmare.

Move That Money

If you don’t have the funds to pay your cards off in full, you should look at your existing credit facilities. You may have a line of credit or a credit card facility that offers a much lower rate than the others. If so, you should look at ways to transfer the high interest debt to the lower interest facility. Some credit card providers will offer zero or low interest transfers at this time of year (for a period of time). Explore your options.

Outside of the obvious benefit of the lower interest, being able to focus on one debt, one payment, will allow you to pay off the balance much quicker, which is the ultimate goal.

Consolidate your Debt with a Lower Interest Loan or Mortgage

If you are juggling various costly debts such as department store cards and credit cards, you may be able to save money by consolidating all your debts into one lower-cost personal loan or mortgage. This isn’t magical “fix-all” as you are merely transferring debt from one lender to another. However, it lowers your interest and lowers your overall monthly payment, then it can be a viable solution. You can set up a timeline to pay off the debt and set up fixed monthly payments so that it is it easier to budget.

Refinance Your Mortgage

Usually, the lowest interest rates are available when the funds are secured by a mortgage. Whether you are refinancing your existing first mortgage, obtain a secured home equity line of credit (HELOC) or a second mortgage, you can usually save a substantial amount of interest and lower your monthly payments considerably by consolidating through the equity in your home.

What’s your best solution?

Your best solution is to be proactive. Anyone of the above or any variation can help. However, it depends on your specific situation. If you want to increase your net worth, keep cash flow manageable and pay less interest, you must take a look at all your finances on a periodic basis. January is a great time, but you should do so 2 or 3 times per year.  Having a plan and executing will get things done. Paying off credit cards with minimum payments or just above minimum payments each month will not.

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VERICO The Financial Forum Ltd.

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