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Friday, November 25, 2011

Managing your Christmas spending

I’m putting up my Christmas decorations this weekend, despite everyone in the office telling me that I have to wait until December. No one tells me when to start celebrating Christmas!! If it hadn’t been for my eldest step-daughter completing her VCE, I would have had them up 2 weeks ago….
Yes, I’m a Christmas fanatic and in my opinion it’s given a bad rap by being called the ‘silly season’. It doesn’t have to be that way at all. There are lots of things we can do to make sure it doesn’t get out of hand and that it’s fun and festive.

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 you need a Christmas budget. Make a list of everyone you need to buy Christmas presents for, and an amount you expect to spend beside each name. I go one step further and try to actually think of an appropriate gift at this point as well. There’s nothing worse than being flustered at the shopping center because you can’t find a suitable gift and you end up spending more than you intended just for convenience.

When buying pressies, 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, can really help guard against impulse buying.

And of course you also need to think about:
  •  Decorations;
  • Christmas get-togethers;
  • Christmas lunch/dinner etc;
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 in December?

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

The drawback to these types of accounts 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.

Don’t wait until the end of the year to spend. Realistically, you can start preparing for next Christmas as early as the January sales. Christmas wrapping paper, decorations, toys, games and much more are often discounted by a significant amount. Or you can 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, and put them on a “Christmas lay by” which meant I could pick them up as late as Christmas eve. So this solved the problem of where to store them!

It also meant I was also able to stagger my Christmas spending. I will offer one tip for this strategy based on experience, is to make sure that as you choose each present write it down next to the name of the person you’re buying it for. Nothing worse than staring at a really great present and wondering who on earth you bought it for…

A warning about credit cards. ‘Plastic money’ makes spending very easy. You need to use your credit card wisely because at the end of the day, it’s a very expensive loan. If you do need to use your credit card over Christmas, pay it off as quickly as possible - it’s high interest and not tax deductible.

So if you are finding Christmas finances difficult this year, don’t ignore the situation – put a plan in place, and if it’s too late this year then do it for next year. Because if you don’t do something different, you’ll find yourself in the same position next Christmas.

Please let me know if you have any other Christmas budget tips, or if you’re going to try any of mine!

Talk soon,