Christmas can be an expensive time of the year but more so when you have a family that wants a holiday, presents and bellies full of goodies. Given that 2021 has been a year where some of us have lost jobs, become single-income families, and really tightened our financial belts, we’re sharing some of the best tips on how to avoid spending mistakes at Christmas. By following this advice, you may even save some money too.
Spending mistake #1`
Using credit cards
This is the biggest mistake Australians make when it comes to Christmas spending—using credit cards. Buy now, pay later sounds like a good idea at the time, but you still must pay it back. Research published by Finder.com.au and analysed by RBA discovered that Australians racked up a mind-boggling $24bn in Christmas credit card debt to fund festivities, an average of just over $1700 per credit card. If you can’t pay it off before the 55-day interest-free period, your debt will start to grow if you’re only paying the minimum balance each month.
Spending mistake #2
The last-minute Christmas Eve spending spree
Overspending is a result of leaving things to the last minute. You don’t want to be rushing around the shops on Christmas Eve, just as the shops are closing. When you’re zooming around K-Mart with a shopping trolley with minutes to spare, you don’t have time to compare prices. It means you could also risk missing out on popular gift ideas. You’ll save money by doing your Christmas shopping early. Give yourself time to find the best bargains and take advantage of upcoming sales like Black Friday and Cyber Monday.
Spending mistake #3
Overspending on expensive gifts
Have you ever noticed that no matter how many Christmas presents your child gets, they just end up rolling around in the Christmas paper and jumping in and out of boxes? Neuroscientific studies have found young children’s brains develop through full-body sensory experiences and this is why rolling playing with discarded Christmas wrapping holds more fascination than the actual gift inside. Instead of trying to prove you’re the best mum/aunty/uncle/grandparent by gifting the biggest and most expensive presents, gift smaller and more affordable—especially while they are still in the developmental stages. It’s usually around age 3 or 4 that children are able to remember Christmases.
Spending mistake #4
Buying for everyone
Rather than purchasing cheap gifts for every family member that will end up relegated to the back of the wardrobe, why not come to a family agreement to have a spending limit or play Secret Santa where you draw names out of the hat and buy for just one person.
Spending mistake #5
Not having a Christmas budget
To avoid making spending mistakes at Christmas, it helps to have a budget. For a quick and easy fix, apply the 50/30/20 rule. 50% of your wages go towards the non-negotiables like rent, food, and petrol. 20% goes directly into your savings account and what’s left over is used for things that you want. If you were to start putting aside 20% of your pay into a savings account from January 1, 2022, by the time Christmas arrives you’ll have able to have an enjoyable Christmas without going into debt.
Gerry Incollingo is the MD of LCI Partners, a firm that specialises in accounting advisory, lending, wealth, property, insurance and legal.
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