Remember how 2019 was going to be the year where you got your personal finances in order? If you are now as organised as you wanted to be well done! If not, I am going to bet that one of the things which has made 2019 a year like every other year was how you approached the end of 2018.
At this time of year its easy to overspend and to take on unwanted amounts of debt. Whilst we are not against using credit cards for convenience, and taking advantage of buy now pay later solutions like Afterpay, unless you take a disciplined approach to their use it can take a long time (sometimes a whole year) to bring things back under control, sometime just in time for you to do it all again.
The problem with these facilities is that they usually mask an inherent failing in your household cash flow which can’t be permanently fixed by extending the amount of debt that you have. Using credit cards to finance short term expenditure is a very expensive way of funding material purchases which you (and/or the recipients of your gift-giving) probably don’t really need or want. Paying in July for a toy that was either broken or forgotten in January makes no real sense.
Far better to set aside a small amount in advance for the likely increase in expenditure you will experience at this time of year. Therein lies the problem though doesn’t it – for this strategy to work it has to be in advance and if you are still paying off the excesses of last year, this can be difficult to do. Interest rates on unpaid balances of credit cards can approach 20 per cent, and some people find themselves using one card to pay off another – a recipe for disaster!
Our Grandmothers “Christmas Club” account was not a bad strategy and allowed her to share the kind of festive season that she wanted to. In the spirit of Grandma, here are a few tips for spending this Christmas which will help you to start next year on the right footing
Plan buy now pay later purchases ahead: Make sure you can afford the full price and that the repayments fit into your budget. Consider any other bills or financial commitments due at the same time as your buy now pay later payments. Merchants offer these facilities in the hope of attracting impulse buyers, try to be at least as smart as the person you are buying from.
Don’t get into debt: If you find yourself regularly unable to pay off your credit cards on time, use a debit card instead. Consider linking your buy now pay later account to your debit card instead of your credit card. That way you’re using your own money and avoid credit card interest.
Don’t overcommit: Work out how much you can afford to spend and stick to this limit. Use credit cards only up to the amount you will be able to pay in full early in the New Year. Aim to have only one buy now pay later at a time.
Remember what’s important: Christmas should be about spending time with loved ones, friends or family. Your time is free to spend how you choose.
Once you have successfully negotiated the Christmas frenzy, within budget and without committing to another year of catching up, the New Year would be a good time to put some plans in place to make sure 2020 is the year you (finally) get your finances in order.
The views expressed in this article are my own and do not constitute personal financial advice. If you like this article why not share it? I appreciate your support. Be sure to visit our blog again for this and other articles. If you have any thoughts, comments are always welcome! Why not connect with me on Social Media so we can continue the conversation.