With Christmas and New Year’s over, our waistlines aren’t the only things that might need to recover as we head into 2020, People’s Choice Spokesperson Stuart Symons says.
“It’s not unusual at this time of year to check your accounts only to realise that you’ve overspent on holiday cheer across the festive season. While it may be disheartening, there are ways you can regain your financial fitness if you’re determined to move through the new year in better shape than you’ve started it.”
10 ways to clean up your finances
1. Total the bill
“Australians spend an average of $1,325 per person for Christmas1. Half of us spend more and, surprisingly, about a third of us don’t actually track our Christmas expenses,”2 Mr Symons said.
“So, step one is to get a clear picture of all the damage done, not just the amount spent of gifts. You need to add up everything – food, drinks, decorations, Christmas crackers, secret Santas, extra fuel, etc.
“If you go through your bank and credit card statements, chances are there will be plenty of purchases you’ve forgotten about, especially small ones that add up fast. Unless you proactively budgeted to cover all these expenses, there’s sure to be a hole in your budget that needs to be fixed.”
To help you in preparing for next Christmas, check out our Christmas Savings Accounts and take the stress out of the festive season.
2. Look ahead
“Don’t look at fixing your holiday budget blowout in isolation – look at it as part of your whole budget,” Mr Symons said.
“A review of your personal or household budget at the start of the year is a good idea anyway, and it means that recovering from any Christmas splurge is less likely to derail any of your longer-term plans or commitments.”
Check out our Budget Planner Calculator to help you in staying on top of your finances and make your money go the distance.
3. Pay off the card as soon as possible
“We all know a lot of Christmas spending ends up on credit cards – debt which needs to be cleared as soon as possible or your purchases will end up costing you more than you bargained for,” Mr Symons said.
“The reality is a $4,000 bill on a high interest rate credit card can turn into a $13,000 debt and take you around three decades to pay off if you only ever pay the minimum monthly repayment2.”
“If you have savings, consider using these to pay off the debt on the card now and then make the commitment to repay yourself over a set period. This could save you thousands of dollars in interest especially if you’ve done serious damage on your card.
“A personal loan may be another option for getting rid of credit card debt as the interest will be a lot less than what you will accrue over a long period paying high credit card fees. It could make paying off your debt a little more manageable and, if you get rid of your credit card at the same time, you’ll be less likely to re-spend the money you’re repaying.
“If you do choose to pay the balance off in instalments, make sure you pay higher than the minimum amount listed on your bill every month, pay more frequently so that your principle amount is smaller by the time interest is calculated and pay extra when you have more money to spare. This can save you thousands of dollars in interest and will help you reduce and pay off your debt faster.
“If you have a card with a high interest rate, consider switching to a credit card with a low rate that allows you to transfer the balance of your current card. And while you’re at it, set yourself a low credit limit which can help you manage your spending.”
4. Buy now/Pay later
“Before Christmas buy now/pay later schemes can look like a good idea, but many people enter into them without checking the terms and conditions and then get stung paying for unexpected account fees or get hit with fines for late payments,” Mr Symons said.
“Different lenders have different rules so check the fine print to make sure you know what you’re paying and how to avoid fees and charges along the way.”
5. Go automatic
“When it comes to paying down Christmas debt, don’t rely on yourself to pay by the due date,” Mr Symons said.
“Work out the fastest repayment plan you can afford, organise with your financial institution for automatic payments – and then stick to it.”
6. Return, sell or re-gift
“Returning, selling or re-gifting unwanted presents used to be frowned on, but now it’s seen as less wasteful and can give others the chance to use and enjoy items that would otherwise just gather dust in the corner,” Mr Symons said.
“There’s an obvious financial upside to re-selling if you make sure any money you might make is not frittered away but put to good use – like paying down Christmas debt or replenishing your savings account. Selling through a host of online sites can be simple and easy, but always ensure you protect your personal and financial information along the way.
“If you’re planning to re-gift, then allocate items to specific people for specific events and make sure you never give it back to the person who gave it to you in the first place! Returning gifts can be tricky, but if you can negotiate it without causing a family breakdown then it’s definitely worthwhile.”
7. Use gift cards
“Every year Australians throw away $70 million by not using gift cards they’ve been given3,” Mr Symons said.
“Amazingly, a lot of gift cards are simply forgotten so if you can’t use the card straight away then look at the expiry date and put a reminder in your diary.
“If you don’t like the store or product the card represents, then try to sell it, buy a gift for someone else, or donate it to a worthy cause. Even if you have to sell it for less than face value, that’s certainly better than simply wasting it.”
8. Use your new year’s resolution for financial gain
“Many a new year’s resolution involves giving up something – smoking, drinking, chocolate etc – so if that’s your goal, then use the money you save to balance your books post-Christmas,” Mr Symons said.
“Even better, you’ll be reinforcing your resolution by seeing an additional, positive outcome.”
9. Christmas Club savings accounts
“They might sound like something from a past era, but Christmas Club savings accounts not only exist, they’re are a brilliant way to take the financial sting out of next Christmas,” Mr Symons said.
“The numbers don’t lie. Just $20 paid in automatically every week will give you close to $1,000 by the time December 25 rolls around again. It’s like giving a Christmas gift to yourself.”
For more information about how you can have a worry free Christmas in 2020, have a look at our Christmas Savings Account.
10. Look ahead – buy ahead
“Most people don’t plan ahead for Christmas – but we should,” said Mr Symons.
“You can make considerable savings by thinking and buying ahead, particularly considering items always sell at a premium in the lead up to December 25.
“Simply make a list of presents and any other items you will need for next Christmas and wait for a good opportunity to buy at a discount. New Year sales and end of financial year sales are obvious times, but you can also harness the power of the internet to chase down great options throughout the year.”
If you need support cleaning up your post-Christmas spending, make use of our Budget Planner to plan your 2020 finances.
2 Based on a $4,000 balance on a credit card with an 18% interest rate.
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