How to enjoy the holidays without overspending

November 28, 2017

With Christmas and the summer holidays now racing towards us, it’s a good time to set a budget for the festive season.

Data from electronic payments company Paymark shows last Christmas Kiwis spent up large with almost $6 billion in card transactions for December 2016.

Unfortunately the Paymark data also shows that $2.8 billion of this spending spree was done using credit cards.

 According to Mercer’s financial adviser Glenys Wilson, it is easy to get caught up in the festive atmosphere created by stores and end up spending more than you should.

That’s why Glenys recommends sitting down and working out a budget before you hit the shops.

“This time of year is very expensive and it’s important to set a financial limit for how much you can spend – not just on presents for each person, but  food, travel expenses like petrol and holiday activities as well,” says Glenys.

“There are so many retail marketing tactics out there to encourage you to spend more, and a budget will help you avoid running the risk of overspending or getting into credit card debt”.

Glenys suggest leaving credit cards at home when shopping to avoid the temptation of using them.

“Credit cards and store cards can have huge interest rates of between 25% and 29%, which is fine if you can pay the balance off in full by the due date,” says Glenys. “But if you can’t you may find yourself in a spiral of debt as compounding interest will apply and the minimum payment amount required often just covers the interest and not the actual purchase.”

To help keep your Christmas and holiday spending in check, Glenys has the following tips: 

Work out a budget for presents, food, travel expenses and holiday activities
Set a limit of how much you will spend on each expense and stick to it. Suggest to extended family putting a price limit on gifts to avoid feeling pressured to match their spending.

Record/track your spending
Most banks have apps or online tools that let you see how much you have spent each day. If you have started to overspend, adjust your spending so that you can stick to your original budget.

Avoid using store cards and credit cards
They may be tempting when you’re caught up in the moment but the resulting bills that arrive in the following months aren’t worth it.

Beware of retail marketing tactics
Buy 2 get 1 free may sound like a good deal, but you could end up overspending just to take advantage of the “deal”.

Avoid extended warranties
Most large items already come with 1 year warranties – paying more to upgrade to 3 or 5 year warranties is often not necessary.

Start planning for next year early
Set up a Christmas/Holiday savings account as early as possible and start contributing small amounts each pay.  It soon adds up and will make next year’s planning a lot easier.

Top up your KiwiSaver account
If you are asked what you would like for Christmas, suggest a contribution to your KiwiSaver account. This extra amount could help you reach your first home goal faster, earn you member tax credits, or just make your retirement savings that little bit healthier.

The information contained on this page is intended for general guidance only and is not personalised to you. It does not take into account your particular financial situation or goals. Before making any investment decision, you should refer to the product disclosure statement or consult an appropriately authorised adviser.

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