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Spend big in the lead up to Christmas then pay for it in the New Year. It’s an all too common habit that many of us fall into, leaving us in serious debt by the time January rolls around.
Start thinking now about ways to practice safe Christmas spending, and you may well avoid that New Year financial hangover. The festive season brings with it many celebrations and dollar spending opportunities, but there’s no reason you can’t enjoy yourself without overdoing it.
Mistake # 1: Not setting a spending limit
There are so many tempting gifts to buy friends and family at Christmas; it’s easy to get carried away. When you add up all the presents you’ve purchased, you realise you’ve spent beyond your means, but by then it’s too late.
To avoid this common scenario, don’t go shopping until you’ve worked out how much you can afford to spend on gifts and your dollar limit per recipient. You might even want to suggest to family members that everyone follows this rule when buying for each other.
Use the same constraint when purchasing entertainment supplies or celebrating with friends – know your spending cap and stick to it. Use an app or online banking to track your progress.
Mistake # 2: Impulse shopping
It’s much easier to stick to a spending limit if you make a list of what you need before you start shopping. Allow plenty of time to make your purchases to avoid last-minute expensive buys.
Next year why not completely avoid the Christmas rush by grabbing bargains as you see them throughout the year and packing them away. The best time to begin Christmas shopping is the day after Christmas!
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Mistake # 3: Not comparing prices
Online shopping makes it quick and easy to compare prices and save. Price comparison websites are handy for filtering categories and looking at prices across multiple retailers. At the same time, look for discounts and coupons that can be used to reduce the cost of products.
Mistake # 4: Catering for all
Christmas is a time of caring and sharing, so share the load by asking others to bring a plate of food for festive functions. Even if you’re hosting the Christmas day meal, don’t be afraid to ask for help with nibbles, side dishes, desserts and bonbons.
Mistake # 5: Being susceptible to bias
It can be hard to spot which marketing strategy has influenced your spending decision. Perhaps you bought a more expensive product because you thought it was better quality or you were worried about missing out due to limited supply. Whatever the bias, it’s crucial to shop with your eyes wide open and employ a healthy dose of skepticism. Before making the purchase, always take time to think through whether it’s a good idea and why.
Mistake # 6: Skipping credit card repayments
If you’re tight on cash due to extra festive season spending, skipping your monthly credit card payment is not a good way out. Not only will the interest quickly add up, but it could also impact your credit score. Under Australia’s Comprehensive Credit Reporting regime, your credit report contains information about your repayment history. The date your credit payments are due and whether you missed payments is recorded. Even if you paid part of the amount owing, it’s still considered a missed payment. This information stays on your credit report for up to two years and could affect your ability to apply for credit down the track.
To avoid a late payment fee, always pay the minimum repayment amount. Better still, don’t exceed your allocated budget for Christmas spending. For significant expenses, like travel costs, spread them out, so they don’t land in one bill.