This Christmas will be different!

It’s unfortunate that Christmas is often called the ‘silly season’. It doesn’t have to be silly, there are things we can do to make sure it doesn’t get out of hand, and that it’s fun and festive. So continuing on with the resolutions theme, perhaps we can implement some Christmas savings ideas for 2011.

We tend to forget that money is just like other aspects of our life, it requires careful planning and commitment to achieve true success. You wouldn’t go on a camping trip without planning, so why should your Christmas spending be any different? You need a plan!

First off you need a Christmas budget (sorry FIDO doesn’t have an online version). Make a list of the people you need to buy Christmas presents for, and an amount you expect to spend beside each name. I also try and actually think of an appropriate gift at this point – it makes it sooooooo much easier when you actually hit the shops.

When buying gifts, try and do it in a planned, controlled manner without getting too emotional about the purchases. Not leaving it to the last minute, and making a list before you reach the shops, could help guard you against impulse buying. When you’re desperate, you can end up spending a lot more than you intended.

Make sure you also think about:
• Decorations;
• Christmas get-togethers;
• Christmas lunch/dinner;
• Cards;
• Kris Kringle;
• Shopping Centre wishing trees.

And don’t forget the Christmas break, whether it’s camping, a resort, or just staying at home and taking the kids to the movies – it all costs money.

So how do you ensure the money is there come December?

I was talking to a client recently that has a Christmas Club account. The best thing about Christmas Club accounts is that they enforce discipline. You only have a short window of opportunity when you can access the funds to ensure that the money is there for Christmas.

The drawback to these types of facilities is that they don’t pay a very high rate of interest, so if you have confidence in your own discipline then you could choose a higher interest bearing account instead.

Alternatively you may even want to implement a longer term strategy that you can draw-down from each year.

These days there are also food hamper plans. These allow you to stagger the cost of food and gifts for Christmas over the year rather than in one big hit at the end of the year. I’d certainly advocate doing your homework to make sure you’re not paying a large premium for the convenience and payment plan.

I’d be very interested in hearing from anyone that has used these services, to find out whether they found them to be worthwhile. Just add a comment below or email me at askCaren@hendrie.com.au.

Don’t wait until the end of the year to start spending. You can start preparing for next Christmas at the January sales! Christmas wrapping paper, decorations, toys, games and much more are often up to 50% off. Or at least take advantage of sales throughout the year – if you see something on special that you know would make a great gift for someone, grab it or put it on lay by.

I always do this. In fact one year I bought all the presents for my nieces and nephews in July (12 in total) and put them on a “Christmas lay by”. By doing this I didn’t have to pick them up until as late as Christmas Eve, so it even solved the problem of where to store them.

With hindsight this was a great idea, because not only was I able to buy presents that were on sale, but I was also able to stagger my Christmas spending. My only caution is to keep a list detailing the present and the person you’re buying it for, otherwise it can be very confusing when you eventually collect that lay-by.

Have you thought about introducing a family Kris Kringle? In my family, the brothers, sisters, brother’s-in-law, and sister’s-in-law all put their names in a hat and rather than buying for everyone, we buy a really nice gift for one person each. Of course this didn’t work out so well for my sister this year when my brother in Byron Bay decided he wasn’t coming down until February…

A quick warning about credit cards….. ‘Plastic money’ makes spending very easy. So much so, that many people are left with a ‘spending hangover’ (thanks to my friend Vivienne James, author of The Woman’s Money Book”, for that term). Use your credit card wisely (remember it’s the most expensive loan you’re likely to ever have). Then get rid of the credit card debt as quickly as possible because it’s high interest and not tax deductible.

So if you found the Christmas finances tough this year, don’t ignore the situation – put a plan in place for this year. After all, if you don’t do something different, you’ll find yourself in the same position every Christmas. Try even one idea, and let me know how you go.

Talk soon,

Caren

Happy 2011!

So what were your New Year’s resolutions? Get fit? Give up smoking? Lose weight? Spend more time with the family? Work harder?

Did you make any financial resolutions?

The new year is a great time to take stock and make some decisions about your finances. Let me start you off with a few examples:

Create a Budget (or update the one you have).

This is the most basic step to getting your finances in order. It’s pretty tough to save money if you don’t have an accurate picture of what you’re spending. Creating a budget allows you to prioritise your spending and determine the patterns. Furthermore, you can work out where you don’t actually need to spend money.

It’s important to make your budget realistic so that you can stick to it. I suggest http://www.infochoice.com.au/distributions/asic/calculators/budgetplanner/index.asp This is a very comprehensive online budget tool. If you don’t already have a budget, it’s a great place to start.

If you do have a budget, then make sure you re-visit it each year in order to ensure it remains up-to-date and appropriate.

Get your credit card under control.

Eliminating debt is one of the most important aspects of any financial plan. Credit cards are probably the most expensive loan you’ll ever have (unless you’re planning a visit to a loan shark a la Sopranos style, in which case nothing I can say will help you).

Credit cards are very convenient, but you shouldn’t be spending more than you earn where you can help it.

Try to pay out your balance once a month – or at least make a decent payment.

Once you have that credit card under control – keep it that way!

Commit to investing:

There are many good reasons for investing, some include:

• provide for retirement;

• retire early;
• children’s education costs;
• sheer pleasure of knowing your money is working for you.

Make this year the year that you stop saying “I need to get around to seeing a financial planner” – do it, we don’t bite.

Perhaps you could make a commitment to save at least $100 per month into a regular investment plan.

Or if you have a lump sum of cash sitting in the bank that you know you don’t need for a few years, explore your longer term options

Invest your tax refund before you spend it! Instead of banking your refund along with the grocery and bills money this year, consider an investment that you can allow to grow over the next few years.

Protect what you have.

If you earn more than $40,000 and don’t have income protection insurance then you need to have enough income producing assets behind you to replace that income in the event you are unable to work due to illness or injury.

If you’re not in such a fortunate position, then you need income protection insurance. Simple as that. If you don’t have it, this could be your most important and valuable resolution.

Review Current investment strategy and portfolio.

The Australian Securities and Investment Committee (ASIC) recommends that all investors review their portfolio at least once a year. In fact, they have made it a legal requirement for all Financial Planners to offer an annual review service to their clients.

Investment is not a “set and forget” exercise. The reason reviews are so important, is because you can factor in changes to the market, economy, and your lifestyle.

Set financial goals and time frame:

It’s always easiest to save money when you have a specific goal – retirement, house deposit, paying off the mortgage, a holiday etc etc. It's important to work out what you want to achieve, and how long you have to achieve it.

A short-term strategy is just as important as a long-term strategy – but they are different. Don’t assume that what you’re doing is the most suitable just because it’s the way you’ve always done it.

Write down your short-term and long-term goals, as well as what needs to happen so that you can achieve those goals.

Learn more about the sharemarket.

Accepting that the value of your investment may go up or down over the short-term could greatly improve the potential for your money to grow over the long-term. Don’t be scared off by the last few years – learn from them.

Get good advice.

Engage professional advice to steer you through the investment maze. Like any professional service, check the financial adviser’s experience, qualifications, fees and services. Knowing your goals is one thing, but finding the best investment strategy to help you reach them can be difficult without guidance.

And yes, I would love it if you chose me and my terrific team to be the ones to help you!


Ok, I hope that gives you some ideas for this year’s financial resolutions. If you have any others, I would love to hear them! Just add a comment below or email me at askCaren@hendrie.com.au

Talk soon,

Caren