I just love Christmas and Boxing Day spending the day with my husband and children, seeing their faces light up and jumping into bed to tell us Santa has arrived. Then there is the opening of presents, and searching for batteries (we always forget) to operate some of the kids toys.
The whole family gets stuck in preparing Xmas Lunch which is a lot of fun, then we sit down to enjoy it which is all part of this amazing day.
So many people then go out and brave the Boxing Day sales spending more than they intended, to me I would rather stay home with the family and spend the day together than fighting with the crowds – prices come down if you wait a week or two…
Why this POST…..
Simple, these two months are the biggest months for spending or over-spending… Then the Credit Card bill comes in, you think OH NO as you don’t realise how much your spending has cost your budget. Every time I write a new home loan, whether it is for a purchase or a refinance I ask my clients to do a simple budget so that I know they can afford the repayments. Very rarely does anyone put an amount in for gifts, even though they may just be making budget…. What this means is technically if it was not budgeted for then you really can’t (shouldn’t) afford to buy it.
Money and or the lack of it can put a lot of stress on the family and yourself as you are constantly chasing your tail trying to make it better. Don’t worry you are not alone, this is such a common problem and in our industry we are constantly looking at how we can help your family manage better by restructuring their finances.
Simple Tips – To Curb over Spending
- My Personal Favourite, work out how much you want to spend on each of your family members and put that money aside throughout the year. It is important to stick to the amount you have decided and don’t deviate from that amount.
- Pay with Cash Only, if you pay on a Credit Card you could be paying up to 19% pa Interest extra.
- Open up a separate bank account dedicated to Gifts and Extra Spending throughout the year, aim for High Interest Accounts.
- Make a list of potential gifts for your family and throughout the year look out for great savings in brochures, online shopping, and other avenues and when you buy the gift put it away until it is needed.
- Sell unwanted or outgrown toys, then use then save the money for something else. You could make someone else happy with something you do not use anymore.
- Create a Budget – My personal favorite is the Money Smart Budget Planner https://www.moneysmart.gov.au/tools-and-resources/calculators-and-tools/budget-planner This is a fabulous tool to use all year round.
- Get crafty and make gifts – you can save a lot of money plus give something direct from the heart.
- Gifts for family members, if you really are having a hard time making ends meet – talk to family members and express your concerns. Don’t be too proud, family and friends really should understand.
Start putting the pennies away for Xmas 2016…
Spent Too Much – What can I do?
You Credit Card may have come in and you then realise the impact of your spending….. It is nice and convenient to pay on Credit Card and we all have the intention of paying off the purchase within the interest free days, but does that really happen – in most cases not. Then the interest hits and sometimes it can be as high as 19% pa…. even more if you use a Store Card.
Option 1 – Credit Card Balance Transfers
Look at changing Credit Cards to one that has a low or nil balance transfer offer for up to 6 months (or longer). Use the promotion time to get your card right down to hopefully nil then you will revert to that banks standard interest rate offer. You can also look at their low rate options for after the promotional period or interest free periods but be responsible so you don’t get into strife again.
Option 2 – Personal Loan Consolidation
This is something to consider particularly if you have several cards as generally you can only balance transfer one credit card. I know that credit cards are very tempting however they really are not the answer if you get out of control with them. There are a few banks that offer interest rates lower than credit card rates, these are generally fixed rates but there are variable options as well. By consolidating into one debt you will find it easier to manage with a lower repayment, however it is advisable to try and clear the debt as soon as possible by paying more than the minimum repayment. Paying weekly or fortnightly also makes a big difference to clearing the debt.
Option 3 – Home Loan Refinance/Consolidation
If you have a Home Loan with plenty of equity (ideally you should have including the incoming debt at least 20% equity to avoid Mortgage Insurance) then this option can really help the family budget immensely particularly in the current market with interest rates in the 5-6% pa range. Even if you don’t have debt and just a Mortgage you can make some amazing savings at the moment with these rates.
The trick here if you do consolidate debt (Credit Cards/Personal Loans) is to pay what you would have been paying (or close too) previously then you will negate the debt sooner due to the lower interest rates. Then you will already be in the habit of paying your consolidated debt so once this is cleared continue paying the same amount if you can afford it then you will then reduce your home loan so much quicker and ultimately be debt free well ahead of schedule.
Need Help or Advice?
Talk to us here at Finance Studio about your options. Sometimes just having a chat and working through your situation can ease so much stress particularly with access to the lowest interest rates in over 50 years. Even if you are not in a position to do anything now, we can always work through a plan to get you to where you need to be sooner.
I hope everyone has a fantastic 2015 with less debt woes.