Budgeting for Christmas

Do you hear that? The clip-clomp of hooves? The jingling of bells? Something is coming down the chimney, pushing bricks from their mortar and bringing with it the warmth of the outside air. You hear it finally end its decent to your hearth with a great bang. 
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Except it’s not Santa who has landed in your living room. It’s your Christmas debt!

Christmas is both one of the most anticipated holidays of the year for many. It represents family gatherings around icy prawns, watching the Big Bash on the TV, and lounging around in the heat. Yet one aspect of Christmas prevails above them all: money.  

For many families Christmas is less peaceful than it is a pinpoint of stress. Last year, Money Smart predicted that the average Australian adult would spend almost $800 on Christmas, and over 34% were predicted to spend more than a $1,000.  

Most worryingly, the research suggests that while most Aussie’s make a budget for Christmas, just under 30% were able to stick to their plan.  
 
Why do budgets go out the window during the holidays? 
For all the reasons we just mentioned. The holidays are celebrated by a vast majority of Australians. They are an opportunity to relax, with lots of adults taking time off work and school-age children being on holidays.  

Parents are particularly susceptible to overspending in these months as their kids are spending more time at home. Kids also have higher expectations of the holiday season than adults, increasing pressure to spend beyond your means.  

Boxing day sales add to this pressure, encouraging additional spending after an already expensive period.  
 
Our tips for this Christmas 
Make a clear budget  

• It’s easy to make a budget. It’s far more difficult to stick to it. Set firm yet realistic goals on spending. Track how much you’ve already spent using a spreadsheet or budgeting tool.  

Hidden Accounts 

• Some banks allow you to hide the account from view or limit access to specific periods. These accounts also commonly don’t come with a card, reducing the urge to spend.  

Chose an appropriate savings method 

• There is no point starting a long-term investment with the goal of withdrawing it in its entirety every year. Select a high interest bank account which can provide small but stable increases throughout the year.  

• Try not to mix your Christmas savings with savings for other goals. Some high interest accounts reduce the interest rate if you withdraw from them. You don’t want to impact your other goals by causing the interest rate to drop! 

 
Black Friday sales 

• Sales can be a great opportunity to save, especially on tech, but be aware of the honey trap that is the Black Friday sale. Stick to what you need and stay within your budget.  

 
Secret Santa / Kris Kringle  

• Presents are often the most expensive aspect of Christmas spending. Try implementing Secret Santa / Kris Kringle with your friends or family to reduce spending.  

 
Dividends 

• If you have an investment that pays regular distributions, you could look into getting them paid to your bank account. Always consult with your adviser prior to taking distributions as this could impact your tax payable and your financial plan. 

 
Avoid generating debt 

• Try using your savings instead of relying on credit cards or Buy Now – Pay Later schemes. We discuss the benefits and downsides of these schemes here.  

 
While Christmas can be an overwhelming time, it’s also a beautiful one. Enjoy this time with your friends and family. Take a break from work or school. Setting up a specific and achievable plan can help you make the most of this rare reprieve.  ​