Tis the season to avoid a Christmas debt hangover

The cost-of-living crisis appears to have hit Christmas, with Australians set to spend almost $4 billion more than last year, according to new industry research*.

Aussies are planning on shelling out $1,361 each this Christmas, up from $1,232 in 2021.

In total, $27.3 billion will be spent this festive season – up from $23.9 billion 12 months ago.

Travel and gifts top the list of festive expenses, with Aussies expected to spend $458 on accommodation/flights over the holiday season and $411 on presents. On average, women ($1,580) are predicted to fork out over $450 more than men ($1,123).

With these stats in mind, it’s worth thinking about how you’ll manage the silly season spending squeeze to avoid surfing in debt rather than the local breakers come the New Year.

1. Get a Christmas budget

Begin the Christmas spending season by calculating what’s affordable. Take a careful look through your budget and be sure not to prioritise Christmas presents over household bills.

Having all your Yuletide expenses in a budget will allow you to see what you can reasonably spend this year to avoid a New Year financial hangover.

2. Be candid with yourself about your holiday season income

Will your workplace close over Christmas? Do you take unpaid leave? If your income is affected over the Christmas break, be sure to factor in a trimmer take-home pay packet into your Christmas budgeting estimates.

3. Plan your gifts ahead

Christmas gifts are one of the most significant festive season expenses, with Australians expected to spend over $400 each on presents**. Make a checklist of the friends, family members, clients and work colleagues you’d like to buy Christmas presents for this year. Grab your diary or use the notes app on your phone to jot down your Christmas gift list. You can also list any gift ideas that spring to mind.

Also, if money is tight this year due to cost-of-living pressures, you could replace gifts with acts of service or experiences such as a family get-together at the park or beach.

4. Cash is king

The usual rules of savvy shopping apply at Christmas – shop around for a good deal, avoid impulse buys, and keep all your receipts if the strides you bought for Uncle Bruce are a tad snug.

Also, where possible, use cash or a debit card for purchases. It’s easy to go overboard with Yuletide spending. But sticking with cash won’t leave you in a significant debt jam come January.

If cash is short, consider lay-by rather than a credit card – or worse, buy now, pay later (BNPL) alternatives that will hit you with hefty interest charges if you’re slow to repay the debt. Using lay-by is old-school, but the beauty is that you usually won’t have to pay any additional fees or charges.

5. Consolidate your way into a happy new year

Even the best-laid plans can go astray at Christmas. So, if you are forced to overdo it on the credit cards, with a BNPL facility or even a personal loan, it’s often an attractive possibility to roll all your debts into one loan.

This can be done by refinancing or consolidating all your higher charging liabilities, such as a credit card or BNPL, into debt with lower interest rate charges, such as a home loan.

Of course, such a significant choice to attack your financial obligations in this way in early 2023 will require the assistance and input of a financial professional such as AAP Finance to steer you down the right path.

*https://www.finder.com.au/australias-christmas-spending-statistics

**https://www.finder.com.au/australias-christmas-spending-statistics