Christmas certainly is a time to celebrate, but one thing that isn’t worth celebrating is the pressure the festive season can put on your bank balance. Here are some useful tips on how to avoid a debt hangover this Christmas…
Christmas certainly is a time to celebrate, but one thing that isn’t worth celebrating is the pressure the festive season can put on your bank balance. Here are some useful tips on how to avoid a debt hangover this Christmas…
There are gifts to buy, meals to make and parties to attend and to get through all the festivities we often resort to pulling out the plastic.
While this can seem a good solution at the time, if you’re unable to pay the money back before the interest-free period ends, then you’re getting into dumb debt.
A dumb debt hangover can last months, or even years. For instance, if you spend $500 on a credit card with an interest rate of 19.5% – easy to do with a new designer dress, a few gifts and a night on the town – and you only ever make the minimum repayments of 3% (up to $15) per month, it could take an eye-watering 28 years to pay back*. The total you could end up paying because of interest will soar to $1,085 – more than double what you’d originally paid.
While red may be the colour of Christmas, here are five smart spending tips to help keep your bank balance in the black this silly season:
1. Create a spending plan – Make a list of all your expenses such as Christmas presents, travel, entertainment and meals. This will help you work out what you can afford to pay and help you avoid the urge to overspend.
2. Make your own gifts – With the craft look currently in fashion, this year is the ideal time to use your creative skills to make or bake your own pressies. Dish out your granny’s recipes and make homemade delights such as lemon syrup, chocolate truffles, Christmas cookies and strawberry jam. Or, if your culinary creations are not your thing, how about looking through your photo collection and getting some snaps printed that you know friends and family will love.
3. Share entertaining costs – If you’re hosting gatherings of friends or family over summer, don’t feel that you need to shoulder all the cost. Get guests to pitch in by asking them to bring their favourite dish and something to drink. This way the occasion will still be special, but even better it will be stress-free.
4. Cut back on daily spending – To help prepare your wallet for the holidays, cut back on your daily flat whites, café lunches and perhaps carpool to work. Saving just $5 per day will quickly add up and help pad your pockets for other festive season costs.
5. Check out local event guides – The summer months are filled with free markets, concerts and other fun outings that don’t break the bank. There are plenty of guides available online, or pop down to your local café or council and pick one up.
Working within a budget can sometimes feel limiting, especially during the holidays when there are so many great things to do and buy. But by working out a plan and making clever spending choices, you can avoid borrowing money you can’t afford and will wake up in the New Year with a clear head and positive bank balance.
For more tips check out www.sorted.org.nz/xmas
* Different banks have different minimum repayment rules. To check out the best way to manage your own credit card debt, visit www.sorted.org.nz/calculators
Happy smart shopping, girls!
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