There are just a few weeks until Christmas, which means families across Australia will soon be putting up decorations, hitting the shops for gifts and filling the cupboards with festive treats – some will have started already.
However, the silly season often places enormous pressure on people to overspend, which can leave many with a debt hangover that lasts well into the new year. Finder.com.au figures predict Australians will spend $8.9 billion on Christmas gifts this year, an average of nearly $500 per shopper.
80 per cent of people do not clear their Christmas debts by April the following year.
Seeing as it is the festive season, we thought we'd take some inspiration from Charles Dickens' A Christmas Carol and show you how thinking about your financial past, present and future can prevent you from racking up unnecessary debt.
You will likely be familiar with the story of Ebenezer Scrooge – a notorious misanthrope who only gets into the spirit of festive celebrations after the ghosts of Christmas Past, Present and Future show him the error of his miserly ways. Let's see how this could apply to your finances.
The Ghost of Christmas Past
Have you ever been forced to rely on credit cards to pay for gifts and other expenses at Christmas? You're not alone. Nearly two-thirds of Australians admitted to Finder.com.au that they use plastic to cover their shopping.
Sadly, 80 per cent of people have not cleared their Christmas debts by April the following year. If you're still saddled with last year's overspending, you may need to examine where you went wrong before you can resolve the problem.
Consolidating credit card and loan debts can help you simplify payments and reduce the interest on higher-rate borrowing. You may also want to contact a financial adviser who can assist you with organising your finances.
The Ghost of Christmas Present
Once you have overcome your past bad spending habits, it is time to budget for this Christmas. Ideally, you will have set a budget earlier in the year and are well on your way to having enough money put aside to cover the festivities.
Commonwealth Bank data revealed only 57 per cent of Australians set a Christmas budget.
Nevertheless, Commonwealth Bank data revealed only 57 per cent of Australians set a Christmas budget, of which one-fifth fail to stick to it. You should assess how much spare money you have each month, decide the proportion of this you want to spend at Christmas and then set a realistic target to work towards.
There are several useful apps that can help you with your budgeting, including the Australian Securities and Investments Commission's TrackMySPEND software.
The Ghost of Christmas Future
After this year's fun is over, you may think you have plenty of time before Christmas 2017. But why not make better financial planning your new year's resolution?
A University of Scranton study published in the Journal of Psychology listed 'spend less, save more' as the third most popular pledge people make themselves each year. Unfortunately, the same research revealed just 8 per cent of respondents see their resolutions through.
One of the best ways to ensure you stay the course is to set measurable targets and track your progress. Book an appointment with an adviser who can help you prioritise your needs, set realistic saving goals and discuss your long-term financial objectives.
Hopefully, taking heed of the warnings of your financial past, present and future will help you prepare better for this Christmas and all subsequent Christmases in the years ahead.
This publication is issued exclusively for the general information of clients and staff of Principal Partners (VIC) Pty Ltd. The contents are not a substitute for specific advice and should not be relied upon as such. Accordingly, whilst every care has been taken in the presentation of the publication, no responsibility is accepted for persons acting on this information.