Paul Clitheroe: Christmas spending

The festive season is just around the corner, and plenty of us will be hitting the stores. Research shows we’ll collectively splurge $9.77 billion on gifts alone this year – that’s about $539 for each of us.

So it’s worth thinking about how you’ll manage the cash squeeze to avoid hitting the New Year weighed down by debt.

Getting in early for festive shopping lets you stagger spending over time, which can make things more manageable. Research by Finder shows more than five million Australians started their Christmas shopping in October 2016 or earlier. 

The usual rules of smart shopping apply at Christmas – shop around for a good deal; draw up a purchase list to avoid impulse buys; and hold onto receipts.

Important rules also apply to the way we make purchases. In particular, aim to pay with cash or a debit card to avoid credit card interest costs. 

If you don’t have the cash, consider lay-by. It may be old fashioned but it’s a perfectly acceptable way of buying, and with most retailers you’ll pay no extra charges.

Figures from the MoneySmart website show last year the majority of Australian dipped into savings to pay for Christmas buys. However one in five relied on credit cards.

The majority (80%) paid the purchases off within three months, but the rest took as long as six months to pay down the card debt. 

If you need to reach for a credit card think about whether it’s really the right purchase for you – especially if you’re already juggling ongoing card debt. Aim to rely on the folding stuff instead.

Paul Clitheroe is a founding director of financial planning firm ipac and chief commentator for Money Magazine.