January 2, 2018 5:19 pm
Updated: February 12, 2018 5:41 pm

Debt hangover: What it is and how to get over it

WATCH: A provincial breakdown of how Canadians felt about holiday spending habits, finances

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The idiom “debt hangover” may not belong to the mainstream vocabulary, but among debt consultants in Canada, it has become everyday parlance. It’s the term that describes a common ailment that afflicts thousands of people in this country right around this time of the year.

Common symptoms of a debt hangover include trouble sleeping, stress, stomach pain, a propensity to fight with one’s spouse or partner, and an aversion to check one’s mailbox or inbox (wherever credit card statements land), according to Stacy Yanchuk Oleksy, director of education and community awareness at the Credit Counselling Society.

READ MORE: A simple way to save money in 2018? Stop shopping

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Nearly a quarter of Canadians say they lost sleep due to overspending during the holidays, according to a mid-December survey conducted by Ipsos on behalf of MNP, Canada’s largest personal insolvency firm.

At 11 p.m. at night, we’re alone with our debt problems, with no one to talk to, said Yanchuk Oleksy, so it’s no wonder many of us end up ruminating endlessly over our latest credit card statement instead of getting much-needed R&R.

READ MORE: Your debt in 2018: The economic trends that could hit your pocketbook

And the lack of Z’s, coupled with heightened stress, tends to feed nasty fights for couples grappling with large debt loads. There’s finger-pointing about who’s the big spender as well as heated arguments about what should be done about the family’s finances, said Yanchuk Oleksy.

Three in 10 Canadians said they felt anxious about the arrival of their holiday shopping bills, according to the MNP survey. And that was before the holiday period was over.

WATCH: There is Good Debt and there is Bad Debt

What causes the debt hangover

Causes of a debt hangover are well known, said Yanchuk Oleksy. The main one, of course, is using credit to buy your holiday cheer, which is generally brought on by a lack of prior planning and budgeting for things like gifts, travel as well as social and family gatherings.

But Canadians’ overspending often doesn’t stop at Christmas or even Boxing Day, said Yanchuk Oleksy. Indeed, the days between Dec. 27 and Jan. 31 can be a treacherous spending slippery slope, with gift card purchases and gift exchanges often requiring out-of-pocket top-ups that quickly add up.

READ MORE: Canada’s low-income households owe $3.33 for every $1 they earn: Stats Canada

And almost a third of Canadians said they planned to shop for themselves post-holiday to buy gifts they didn’t receive, according to a recent survey conducted by Angus Reid for FedEx.

Even New Year’s resolutions are a shopping trigger for many. “You want to do yoga, so you get yourself a new yoga mat, and then there’s the gym membership that will only get used twice in a year,” said Yanchuk Oleksy.

How to get over your hangover

Curing a debt hangover is about having a plan and pacing yourself, said Yanchuk Oleksy. Here’s how to do it:

Avoid financial starvation and come up with a sustainable budget instead. Much like dieting, a “feast to famine” approach will likely be short-lived when it comes to tackling spending habits, said Yanchuk Oleksy. Instead of a drastic spending diet, formulate a sustainable budget you’ll be likely to stick to all year, she added. The first step is tracking your expenses, which will both show you where all your money is going and keep you more accountable, leading you to spend less in the first place.

READ MORE: Bank of Canada keeps interest rates steady, leaves economists guessing about next hike

Have a plan to pay off your debt. Once you know what you’re spending, you can figure out where and how much to cut back on in order to bring your debt load to zero. But a debt plan also means deciding what debt you’ll be tackling first. While technically it makes sense to pay off your most expensive debt first, emotionally sometimes it’s easier to pay off smaller debts first, said Yanchuk Oleksy. You can think of the first method as the “avalanche approach” and of the second strategy as the “snowball approach.” For example, if you have a $5,000 credit card bill and another $6,000 bill, the avalanche approach would consist of making hefty payments toward your $5,000 debt, which likely incurs higher charges, while keeping up with minimum payments on your other card. The snowball method is about generating positive feelings by quickly paying off your smaller bill. That small victory will then hopefully sustain you through the bigger challenge of chipping away at your larger debt load, said Yanchuk Oleksy.

READ MORE: The average Canadian owes $8,500 in consumer debt, excluding their mortgage: Ipsos poll

Go see a specialist. You can definitely draw up a budget and debt plan on your own – there are plenty of books, blogs, online tools and workshops that will teach you how to do it, said Yanchuk Oleksy. Sometimes, however, it might be a good idea to get a second opinion from a non-profit debt consultant. “We look at the whole financial picture, including how many people are in the family and what’s your timeline to retirement,” said Yanchuk Oleksy. A debt repayment plan for someone who’s 64 may look completely different from one for someone in their early 20s, she noted. And often, debt consultants can act as impartial referees in debt-fueled family squabbles. “It helps to have someone who’s completely neutral to the situation,” she added. If you haven’t done so already, you might also want to talk to your financial institution about your debt consolidation options.

Finally, start saving now for Christmas 2018. “Now is a really great time to open a savings account and start saving for a debt-free 2018 holiday,” said Yanchuk Oleksy. Most of us can gather all your bills for the 2017 festive season, including anything from wrapping paper to babysitter costs, and then divide that total for the 22 bi-weekly pay periods that lie ahead of us before the next shopping spree will hit our wallets. The resulting amount is what you need to shave off your paycheque starting right now. Unless you have extravagant holiday shopping habits, the amount will likely be small enough that you won’t notice it, especially if you set up automatic transfers, said Yanchuk Oleksy.

© 2018 Global News, a division of Corus Entertainment Inc.

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