For many Australians, a relaxing holiday is followed up by stressful debt repayments when they arrive back home, as they struggle to pay off the loans and credit cards used to fund their trips away.
If you don't want your holiday spending to spoil the rest of your year, following these 5 tips could help you avoid 'debt lag' or minimise its effects.
1. Stick to a budget
Work out how much money you'll need for your holiday by comparing the cost of flights and accommodation and remembering to budget for meals, activities, visas and spending money. If you're worried your trip is costing too much, consider cheaper alternatives or free experiences. Booking flights and hotels in advance could give you discounts.
2. Avoid credit cards
Many people rely on credit cards to pay for their holidays, especially if their cards offer tempting interest-free currency conversions and withdrawal fees, but this could encourage you to spend more than you can comfortably afford. Trying to save up for your holiday in advance will help you avoid credit card debt. Some debit cards also have the same benefits as credit cards without the interest.
3. Check currency conversion fees
If you'll be taking your credit or debit card on holiday, check whether you'll be charged when paying with your card abroad or withdrawing cash from foreign ATMs. Currency conversion fees and transaction fees can quickly add up if you use your card every day, so you should look into cards with no fees or lower fees or buy a travel money card.
4. Take out travel insurance
When you're trying to cut costs on your trip, travel insurance is often one of the first things to go. But being covered by insurance could make a huge difference if you need to pay medical bills overseas or you lose your belongings. It's recommended that all travellers take out insurance, but this is especially vital if you're visiting a country with health or crime risks, or if you're planning to get involved in risky activities.
5. Pay off your trip in advance
This option isn't possible for everyone, but if you book the bulk of your trip many months in advance, you could have the chance to pay off credit card payments by the time you head to the airport – so you can look forward to a break free from debt.
How to pay off your debt lag
If you do return home with debt lag, paying off your travel debt sooner rather than later can help you avoid high interest and financial stress.
Increase Your Repayments
If you paid for some of your trip on your credit card or with a loan, increasing the amount you pay back every month will clear your debt sooner, meaning you'll pay less interest overall. Make sure you're not paying more each month than you can comfortably afford.
Consolidate Your Debts
If you're struggling to pay off multiple credit cards or loans every month, talk to a financial advisor about consolidating your debts into a more manageable single payment.