It can be the most wonderful time of the year but for many shoppers, Christmas is also the most expensive. The festive season is full of both fun and obligation, with events, food, drinks and gifts; many of which can leave consumers with very empty pockets by the time January 1 rolls around. Here are four tips that will help you to celebrate Christmas without emptying your pockets in the process.
Research from ASIC’s MoneySmart found Aussies spend an average of $1079 over the Christmas season. State by state, the spending per person on gifts ranges between $548 in New South Wales and $401 in Victoria. Even more revealing is 57 per cent of Australians know the importance of being prepared and pre-emptively set a budget to cope with the festive season, but only four in five people actually stick to it.
The impact of this can be staggering; not just on finances but on health too. At Acorns, we undertook research to find out the toll money worries can have on wellbeing, with 70 per cent of respondents noting they experience depression and anxiety over the state of their finances. These feelings can be exacerbated during times of heavy consumer spending such as Christmas.
But it’s not all bad news. There are a number of things you can do now and in preparation for next year in order to stop the pinch of the silly season.
Set a budget – but make sure it works
When it comes to the festive season the best piece of advice is to spread out the cost by budgeting early – but set a budget that works. Budgets are key for saving, but if they are comprised of good intentions rather than achievable steps linked to a goal, they’re unlikely to stick. Keeping a financial plan is a discipline and needs to be approached with the right mind set; it should be viewed as part of any budget just like other expenses such as paying rent or bills.
There are two ways you can go about setting a budget. You can spend hours working out your expenses and where money can be cut out, and then aim to stick to this plan. While can help uncover where money is disappearing to, can be difficult to stick to such a rigid plan as part of a lifestyle. The other option is to put away 5 per cent of your earnings automatically, leaving the rest free for expenses and recreational uses. While its slow going, approaching savings like this means a kitty can grow over a period of time and gives plenty of time to get finances into gear for next Christmas.
Make automatic deductions
Once you’ve worked out how much you can save, the next step is to put the money somewhere. Automatic deductions have the benefit of removing your savings before you even get a chance to notice it is missing, meaning you’ll adjust your spending habits to match your new balance. Over the long term, the hard work will be done for you by the time the festive season arrives.
One solution to make this even easier is to hold money in a separate account from your main bank in a high-interest account or within a FinTech app like Acorns. Not only does this allow passive investment, it also ensures funds can only be withdrawn if you really need it, rather than when willpower is low.
A credit card can seem like an important part of your arsenal when it comes to grabbing last minute gifts but avoid it if possible. ASIC found that 20 per cent of Australians plan to use their credit card for presents, but doing so can often leave you with a debt hangover coming into the New Year.
Further, it can often be harder to pay off debt than we think it will be. ASIC found that 80 per cent Australians plan to pay off their credit cards in three months following the Christmas season, but in reality it can take much longer, particularly if unexpected costs pop up, hindering payment plans.
If a credit card is necessary it’s wise to keep the limit low. A $1000 limit should be plenty for any expenses needed over the festive period, while still leaving debt to a manageable level.
For some, the retail experience over Christmas is part of the festivities, but when it comes to shopping for gifts its best to go prepared. It’s easy to be tempted by the Christmas present displays but having a strategic plans for navigating gift-giving will stop you from overspending.
If you have the time up your sleeve, look for bargains online in order to ensure you get the best price possible. Shopping events, like the recent Black Friday and Cyber Monday deals provide an option for savvy shoppers to save money on gifts, and stores regularly announce sales throughout the year. It’s also important to set a spending limit per person to ensure you only buy what you can afford, and your generosity doesn’t leave you with empty pockets.
George Lucas is the managing director of Acorns Australia.