The idea of financial planning is ultimately using what you have to allow you to enjoy life now as well as in the future. While many strategies are geared towards building your wealth to fund your retirement later, the same principals can apply for any of life’s major events, including your annual Christmas splurge.
With Australians estimated to be ready to spend $9.77 billion…yes I said BILLION on Christmas gifts alone, it’s definitely an expensive time of the year. So how can you approach it so that Santa is visiting rather than the repo guy.
Ok so you might not have too much time to do this now but maybe be mindful for next year. Consider all the people that you need to buy presents for, travel costs and dinners that need to be paid for and decide on a reasonable amount that you want to spend in total. Divide this by the number of pay cycles you will have before next Christmas and start saving.
Decide on your limits per person and stick to it. So if you’ve budgeted for a present of say $50, this means sticking to it or alternatively, spending less on the next present to even it out.
Ditch the Credit Card
Credit Cards can be seen as a convenient way to buy things now and paying them off but you effectively end up spending more with the high interest rates charged – around 20%. So if you’re putting on plastic, look at the price and add at least 20% to that price. If you think you’ve found a bargain at $50, is it so much of a bargain when you’re probably going to pay $60 if you pay off the debt as next Christmas rolls around.
Currently there is almost $32 billion in credit card debt held by Australians, with an annual interest cost of around $5.5 billion. With a good chunk of the $9.77 billion from Christmas shopping to be added to that shortly, these interest costs will only rise. If you can’t afford it now, how can you afford it later plus interest?
There are plenty of sale type shops online and while a trip to the local shopping centre can be a good one-stop-shop to get things done, they can also be expensive. Shop around to ensure you’re getting the best deal.
But most of all, don’t spend beyond your means! Christmas is a time of fun, family and enjoyment, not financial stress.
A version of this article has appeared in Money Magazine