With most people having last received their paycheques in the middle of December, stretching out that money until the first pay day of 2021 can be a difficult task.
Speaking to TRUELOVE, Benay Sager, Chief Operating Officer at debt counsellor company, DebtBusters, said that data from previous years shows that many consumers find themselves under financial pressure in January and often take out loans to see them through, adding more long-term financial stress.
“Unfortunately, there will be more pressure on consumers to borrow in 2021 because of the impact of the Covid-19 pandemic on the economy. However, there are two sides to each coin: for the household budget, one side is borrowing, and the other side is spending. Consumers should adjust their spending first before borrowing more money,” he said.
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Sager gives three tips to consumers who are worried about whether their finances will stretch until the end of the month:
1. Don’t worry, act.
“Worrying about whether you’ll have enough money to pay the bills, prepare the children to go back to school and put food on the table will increase your stress levels, but won’t solve the problem. On the other hand, checking your bank balance and listing the expenses you need to pay before your January paycheque will give you some perspective on where you stand. The exercise should also give you some idea of where you may be able to save on unnecessary expenses.”
2. Be responsible.
“To make ends meet and save some money in the short term, some people cherry pick which debts to pay in January and don’t pay others, hoping they’ll be able to make up the missed payments later. The problem with this approach is that while it may provide some short-term relief it ignores the long-term implications. Research shows that on average it takes people who skip December payments two years to catch up. Given the current state of the economy it’s now likely to take even longer.
Worse still, not meeting your financial obligations will negatively affect your credit score. A poor credit score makes it harder to get approval for loans, retail accounts, vehicle finance, rentals and numerous other financial services. It could also mean that you’ll be charged higher interest rates as you are considered a higher risk.”
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3. Get help if you need it.
“There’s another important benefit to taking the time to assess your financial situation – it allows you to get help before you get into irrevocable financial difficulty. Many people who could benefit from debt counselling leave it too late, potentially getting deeper into difficulty and ultimately risking their homes and cars being repossessed.
If you think you may be financially overstretched contact a reputable debt counsellor, who will then do an assessment to determine whether or not you are over-indebted.”