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Holiday pay can kick-start your future
Sebastian S.

5 free tips: Holiday pay can kick-start your future

Why you should use your holiday money to pay off your debts

In October, it is expected that thousands of Danes will have the opportunity to have three weeks of frozen holiday pay paid out, or rather reimbursed - if they ask for it. The total amount expected to be paid out to Danish employees could reach up to DKK 40 billion.

The payment of the frozen holiday pay is based on the government's wish to boost Danish consumption after an economically difficult period for Danish employees and companies in 2020. 

Here at Collectia, we recommend that you carefully consider the use of your vacation money - and if you may have unpaid debts to companies or debt collection companies - use them here so that your debt does not increase further.

Why spend my holiday pay on debt?

For most people, the holiday money is a welcome opportunity to spend it on vacation or other consumer goods that you have been dreaming of during the year. Here at Collectia, we have allied ourselves with debt counselor Sebastian Andersen to get his advice on why the holiday money would be ideal to use to settle debts.

"Statistically speaking, it often turns out that vacation money goes to increased consumption, and it is often tempting - but if you have debts to banks, companies or a debt collection agency, it would be a very good idea to look that way with perhaps just part of your vacation money. It is very rare that debt does not have a price - and for some, that price is extremely high - in terms of interest, fees and running costs. For example, if you have unpaid invoices with a debt collection company, yes, you will experience an ongoing addition of interest of 8.05% plus various collection costs, reminder fees and the like. spending the vacation money on debt settlement is thus a really good long-term investment."

and he continues:

For example, if you owe 10,000 kroner, your debt in the first year will look like this:

Principal: 10,000 kr
Reminder fee: 300 kr
Collection fee: 1300 kr
Interest (8.05%): 800 kr

Total first year: 12,400 kr

Thus, your first year costs for owing 10,000 kr are 2,400 kr.That is 24% in costs. If you ignore your debt for maybe 2 or 3 years, the 10,000 kroner will have increased to just under 15,000 kroner.

5 free tips to reduce your debt with your holiday pay

Here are 5 free tips if you are in debt to a company and are due to receive your holiday pay in October.

1. Get an overview of your debts

At Collectia, we often see that many unfortunately do not have an overview of their debts - and often do not know what is owed and how much is owed.

Knowing how much you owe and to whom is a prerequisite for becoming debt-free. Therefore, it is important that you try to get an overview of your debts. If you know that you have unpaid invoices with a debt collection company, most debt collection companies today offer an online access where you can easily and quickly get an overview.

You can also always call a debt collection agency to find out what you currently owe.

2. Make a budget

Once you have an overview of your unpaid bills, make sure you set a budget for your fixed expenses.

A prerequisite for becoming debt-free is to know what your total income and expenses are. This means knowing what you have left for yourself each month and what you may have available to pay off your debts.

3. Contact your creditors - and make a plan with them

Once you have an overview of your debts and your finances, it is a good idea to contact your creditors and possibly the debt collection agencies that may contact you periodically.

When you contact your creditors, it should be with the aim of reducing your debt - in whole or in part. Many creditors and debt collection agencies will understand your financial situation, and it will often be possible to pay off or defer a payment if your finances do not allow full recovery at the moment.

The most important thing is that you make the contact. This shows a willingness to find a solution - and is often rewarded.

4. Cut unnecessary benefits

Once you have an overview of your fixed expenses, it will be a good idea to review the expenses that can easily be cut - and there is often a lot of money to be made.

Many people will find themselves paying every month for services they may not use at all - for example, streaming services, subscriptions (e.g. fitness and magazines) and the like.

Cut them out if you don't use them - a couple of streaming services can quickly save you £500 or more.

5. Get help if you need it

Many people with financial challenges often find it difficult to manage their debts - and to put a plan in place to pay them off.

If you are struggling with your financial situation, it is a good idea to work with a professional, friend or family member. Together you can get an overview and make a plan.

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