Liam Croke has some tips to help you stop overspending this Christmas
I don’t know where the year has gone. I can’t believe I’m writing this article with only days to go to Christmas.
The Christmas adverts are well underway, and the shopping frenzy has already begun, and when it’s all over, there will be that long, seemingly never-ending wait until you get paid again in January.
The run up to Christmas can be stressful, (it is claimed you are 5% more likely to suffer a heart attack during Christmas than any other time of them year because of the stress that comes with it) busy, and very expensive. We typically spend c. €600 more in December than we do in any other month of the year.
So, from a financial perspective, Christmas can be a very challenging time of the year.
We all want to be generous, especially to those who matter most to us. But it can lead people to mistakenly getting into debt, spending all of their annual bonus (if they get one) or raiding their savings to buy presents and fund all the other costs of the season.
At any time of the year, we are poor at setting and following through with a budget, but it really is important to sit down and plan the month ahead, and work out with your partner, what you are going to spend.
If you don’t, you are likely to spend impulsively and end up with either a hefty dent in your savings and/or an increased amount owed on your credit card. One study discovered about 25% of impulsive purchases at Christmas time have been made using credit.
The term YOLO - you only live once - might influence some of these purchases, but when Christmas is over, and the excitement has died down, that care-free attitude you had a month earlier, changes to one of remorse.
Buyer’s remorse is that feeling when you get your credit card statement, which reminds you of those purchases you made and you wonder what the hell you were thinking. But unfortunately, there is no going back, so you have got to be careful and not fall victim to this.
Otherwise, you could get yourself into a position where you still owe money on things you bought the previous Christmas. Research has shown this applies to up to four out of 10 people who overuse their credit card at Christmas.
I’m not going to patronise you with a list of things you should be doing come Christmas but there are some ideas I like which might help you this year and they are:
Keep a running total
Make sure you keep a close eye on your spend, so whether you write it down on the back of an envelope, on an excel spreadsheet or an online budgeting tool, keep a running total.
To help with this, there is a very useful app called Santa’s Bag and it will track how much you are spending, who you have to buy for, whether you are over budget or not, where you bought the present and for who.
Agree a spending limit
When you are buying gifts for family members of friends, consider a spending cap per person. This stops you overspending and picking up something because you personally like it or are under pressure to get something.
If you find a present that’s a good deal, look at the cost of the item not the discount i.e. if you set a budget of €30 for someone and find something that was €30 but is now reduced to €20, leave it at that. Don’t look to spend another €10 to make up the difference.
Look at your wardrobe
Do you buy a new outfit for yourself and the kids? I know people who buy outfits for Christmas Eve, Christmas Day, St. Stephen’s Day and New Year’s Day. Look at your wardrobes and decide what you need in December.
Planning for these purchases and budgeting for them will help you buy what you needrather than simply snapping up whatever’s on sale.
The chances are good that if you spend a few more minutes online comparing prices, before you hit the shops, you can easily get what you want for less. Or, make the most of discount websites like Groupon or Living Social. It might be a good idea to sign up to a site like them before you make any purchase as you might find the item you were looking for at half the shop price or even better.
Leave your credit card, friends
and kids at home
I know shopping with others is all part of getting into the Christmas spirit, but you are more likely to overspend if you shop with friends or family. You look incredible in that jacket or those shoes are a steal tempt you into spending more than you had planned to.
Shopping with children at the best of times can be difficult but when you are running around looking for presents, it can be even worse. You end up spending money on them to give yourself an easier time, so leave them with Granny and shop solo.
And the final thing you should leave at home is your credit card. Don’t leave it in your wallet or purse,. it’s just a temptation. Stick to cash, it forces you to stay within budget. You don’t have any other choice because if the money isn’t there, you can’t spend what you don’t have.
Liam Croke is MD of Harmonics Financial Ltd,
based in Plassey. He can be contacted at firstname.lastname@example.org or www.harmonics.ie