With howling wind and even snow in parts of the country this past week, it might not quite seem like it – but spring has indeed sprung. I hate to be the one who mentions it even before Farmers and The Warehouse have started rolling out tinsel and playing carols on high rotate: but it also means Christmas is just around the corner.
The way Kiwis usually fund Christmas presents, Christmas dinner and the Christmas holiday, is on our credit cards. Reserve Bank data shows we ticked up about an extra half a billion dollars on our credit cards in the month of December last year alone. That’s not total, that’s half a billion dollars more than we ticked up in November. Canstar estimates that about 63% of that will incur interest, because the majority of us won’t pay it off before the interest-free period is over. With an average interest rate of almost 20%, Christmas quickly becomes even more expensive than you thought it would be.
So how can you avoid that sinking feeling when you open your credit card statements come January and February?
The first step is to work out what the holiday season is likely to cost – how many people would you like to buy gifts for, what’s the budget for each person? How many people are coming over for Christmas dinner? Will you go camping or will you rent a holiday home? What’s the cost of getting there?
The next step is to work out if you can actually afford that. How much money can you set aside each payday until Christmas, and is that enough to cover the bill you’ve just totalled up? If not, it’s time to revisit that initial budget to make it fit what you can fund. Everyone wants to provide their family with a Christmas to remember, but the memories are less enjoyable when you’re still struggling to pay it off six months later.
Ideally, I’d advise you to cut up your credit card – that forces you to spend only the money you’ve actually got, rather than borrowing money you don’t have.
Some ideas to help cut the cost of Christmas:
- Put everyone’s name in a hat and have everyone buy for the person they draw out, with a set budget for the gift.
- Ask aunts, uncles and grandparents to buy useful gifts for the kids – a new jacket for a growing child, rugby boots for the new season, swimming lessons or some new togs – things that kids will love, but they also need.
- The cost of sending presents can double the cost of the gift. Online retailers often offer free shipping, which can help make it affordable to make family members who live far away still feel loved.
- Spread the work (and cost) of Christmas by day asking family members to bring a plate or a bottle.
Being generous is a lovely quality, and people tend to be exceptionally generous around Christmas time, but consistently giving more than you can afford to give will only ever deliver you one result: debt. Making a budget and planning ahead can help make sure creating a Christmas to remember will not result in credit card bills you’d rather forget.