Christmas debt can have a bigger impact than you may think.
Many sources, including the Reserve Bank of Australia, have discovered that there has been an increase in the cost of living since the start of May when rates began and have continued to increase. Due to this, all Australians are feeling financial stress and financial hardship in some way or another.
Reflecting this rising cost of living, is the 29.0% increase in household spending through this year. The Australian Bureau of Statistics has also found that this increase is evenly spread across both discretionary (+29.8%) and non-discretionary (+28.4%).
As the Christmas period approaches, it is vital to plan. This plan might consider the effect your upcoming spending decisions may have on your financial goals going into the new year. The following steps aim to prepare you for the joyful but stressful month ahead without setting back your financial goals.
Step 1: Consider the impact of using Buy Now Pay Later and credit facilities.
Using Buy Now Pay Later (BNPL) and credit facilities can quickly gain funds for Christmas. However, it is also important to consider what impact these commitments might have on your future financial goals. They can become a not-so-festive reminder of the costly festive season.
Before buying Christmas gifts, etc., using these types of services, ask yourself:
(1) Have you considered your ability to pay the amount of the repayments and the impact of additional interest rate repayments and fees those services charge?
(2) Have you considered these repayments and their impact on other obligations or New Year’s goals?
Step 2: Give yourself a Christmas allowance.
Planning is a proactive and effective method to avoid not-so-festive Christmas debt. You can prevent repercussions later in the new year by giving yourself an allowance.
To give this allowance a figure, you need a Christmas budget. Then, you can find the best amount to allocate to this allowance without breaking the bank and avoiding Christmas debt. But also, have enough to enjoy the festive season. Remember, though, that this amount will vary between households due to incomes and because everyone holds a different value to Christmas.
Budgeting does not have to be a strenuous and time-consuming task; there are lots of valuable tools that you can utilise, such as:
- Excel Spreadsheets
- ASIC MoneySmart Budget Planner
- My Prosperity
Help My Wealth recommends my Prosperity. For more information about the benefits of My Prosperity, please check out the clip below.
Sticking to this Christmas budget could not only help you avoid Christmas debt. It could also positively impact your future financial goals by avoiding debt hangovers and creating a positive habit. Thus, giving you the potential to reach goals quickly and empowering your financial success.
Step 3: Find ways to decrease costs during the festive season.
There are plenty of ways to decrease costs during an expensive season and help you stick to that allowance and not build Christmas debt. Here are a few creative ways to save during the festive season:
- Secret Santa is an excellent way to receive a gift without breaking everyone’s bank.
- Hand-made Christmas gifts; Pinterest is great for sourcing ideas.
- Get everyone to bring a food dish to share at Christmas lunch/ dinner.
- Access loyalty points from rewards programs for gift funds.
- Stocking stuffers do not have to be expensive; they can be cheap and useful gifts like lip balm or socks.
Step 4: Enjoy the festive season.
Although planning for the upcoming season can be overwhelming, it is important not to forget the joys of the festive season. It is the time of the year to relax and unwind after another busy year, and spend time with friends and family, so make the most of it and enjoy the memories.
Help My Wealth is here to help.
If budgeting for this festive season is overwhelming, or you are worried about Christmas debt, you may need some guidance. Help My Wealth is here to help. Our community offers those in need of proactive budgeting, practical strategies, and tools to achieve this, along with guidance along the way. So, contact us today to organise a quick chat to find out how we can help you.