By Hannah McQueen
The tinsel is out at The Warehouse and chocolate Santas are in stock at Farmers (yes, already!) which can mean only one thing: Christmas and all its festive cheer - and financial strain - is just around the corner.
Somehow, Christmas always manages to sneak up on us, even though it comes around at the same time every year!
As a result, the way Kiwis usually fund the festive season is on our credit cards. Reserve Bank data shows we ticked up almost 7-point-3 billion dollars on our credit cards last December, up 5.6% on the previous Christmas. Canstar estimates about 63% of that will incur interest and with an average interest rate of 20%,Christmas quickly becomes even more expensive than you thought it was!
So how can you create a Christmas to remember without running up credit card bills you’d rather forget?
The first step is to work out what the holiday season is likely to cost – it sounds simple, but it’s astounding how many people don’t do this basic step! Work out how many people do you need to buy gifts for and what the budget is for each gift. How many people are coming over for Christmas dinner? Will you go camping or will you rent a holiday home? What will it cost to travel there?
Once you’ve got that number, it’s time to work out if you can afford that! How much money can you set aside each payday before Christmas (I don’t mean to freak you out – but there aren’t many left!) and will that cover what you’ve just added up? If not,it’s time to carve your Christmas spending to fit your budget.
Ideally –cut up your credit card because it forces you to only spend money you’ve actually got!
Some ideas to help cut the cost of Christmas:
- Ask the rellies to buy useful gifts for the kids – rugby boots for the new season,swimming lessons or clothes to replace those they’re growing out of. There are only so many toys kids can appreciate on Christmas day anyway, right?!
- Put everyone’s name in a hat and have everyone buy for the person they draw out, with a set budget.
- The cost of sending presents can double the cost of the gift. Using online retailers who offer free shipping can help make it affordable to make international family members feel special.
- Spread the cost (and the work!) of Christmas day by asking visitors to bring a plate or a bottle.
Being generous is a lovely quality, but giving more than you can afford, year after year, will only ever deliver you one result: debt.
Come January, the Christmas splurge normally results in ‘sort finances’ being put on the New Year resolution list, (often up there next to ‘get fit’). But the most common thing our New Year clients say to their financial adviser is ‘I wish I got onto this last year’ – so why not get a head start on 2019?
By Hannah McQueen, author, authorised financial advisor and founder of EnableMe – Financial Personal Trainers. www.enableme.co.nz