Here are our five tips for breaking bad financial habits this holiday season...and keeping your finances on track all year round.
Like the old tune says, ‘it’s the most wonderful time of year’ – but for many of us, it’s also the most expensive. Over one third of Australians reach for their credit card around Christmas time, racking up an average debt of $1,666. So how can you avoid a financial hangover when the New Year rolls around? The best way to break the pattern of a financial binge and starve is to form good spending and saving habits throughout the year. So if you’re already worried about the strain on your wallet this silly season, here are five ways to get your finances in shape for 2019.
1. Plan for the year ahead
While it may seem daunting to think about your next 12 months’ worth of spending, it can help you get a clearer picture of when the most expensive periods will be. That way, you can start preparing for them in advance. You may already have a weekly or monthly budget in place to keep track of your day-to-day cash flow. But if you look at your expenses for the next year, you can start planning for one-off costs like your car registration, insurance premiums or education fees.
2. Save first, spend second
Once you have a big-picture view of your upcoming expenses, you can set up a regular savings plan. Many of us are in the habit of putting aside whatever is left from each pay cheque after we spend, which means we often end up with very little in our savings account. The trick is to reverse this mindset and put aside some savings before you start spending. The easiest way is to set up a regular direct debit from your everyday bank account, scheduled for each payday. With a fixed amount automatically transferred to your savings account, you’ll be able to grow your balance without even having to think about it.
3. Budget for major purchases
If you’ve set your sights on a big-ticket item like a car or an overseas trip, it’s important to be realistic about how much it will set you back. It’s always a good idea to overestimate the cost, so you don’t get caught short. At best, you’ll end up with a little cash left over to add to your savings. And of course, make sure you shop around before buying so you can get the best deal. By figuring out the cost well ahead of your purchase date, you can then work backwards to calculate how much you need to save until then. You could even open up a separate account for your one-off goal so you can keep track of your progress and avoid the temptation to dip into those savings.
4. Be careful with your credit card
If you don’t keep a close eye on your spending, the urge to splurge on your credit card can kick in. Before you know it, you could end up in a debt cycle where you’re repaying interest upon interest. In fact, almost one in five Aussie consumers are behind in their credit card payments, so it’s best to avoid becoming a statistic. Instead of splashing out on each purchase that takes your fancy, it makes financial sense to wait until you’ve saved enough cash to pay for it outright. If that’s not possible, you might look into alternative payment options. For instance, some retailers may let you pay in instalments or enter a rent-to-own agreement.
5. Find ways to cut back
The key to keeping your finances on track is to prioritise your spending. This is especially important during the expensive periods like Christmas – and if you’re a generous gift-giver, you’ll need to tighten your belt in other areas so you don’t blow your budget. Take a look at your regular spending and think about how you can trim it. For example, if you put your daily coffee habit on hold for the month of December, you could end up with around $100 more in your pocket to spend on presents. Or, perhaps there’s an upcoming expense that can wait until January, like the pricey haircut you’ve been planning. And remember, when it comes to getting your finances under control, your financial adviser can help you create a budget and savings plan that works for you all year round.