Christmas is a time when many of us overspend, and we put far too much on our credit cards so that it takes months to catch-up and pay off our debt. This, in turn, can have an adverse effect on our other financial commitments, such as our home loan. So rather than overspending this year, lets look at ways you can save.
Saving More Over Christmas and Spending Less
Dont borrow to buy gifts Sure its nice to buy family and friends something expensive to show that you care. But, often a smaller gift can mean more, especially if its thoughtful. So rather than buying something costly, think affordable and only buy whats within your budget. For instance, if you have 20 people to buy presents for, and you only have $500 to spend, then budget accordingly and spend $25 on each person.
Dont use your credit card to buy gifts Credit cards incur between 17 and 21 percent interest after their interest-free period, which is usually 30 to 60 days. If you dont pay off your credit card balance over the interest-free period, then youll end up paying more than you bargained for and the gifts you bought will be even more expensive.
Put your money on your credit card If you have cash to buy gifts with, but you dont want to carry this around with you when youre shopping, then pay this onto your credit card account before you go out shopping. This way you are spending your own money, not your credit card providers so it wont cost you anything in interest.
Dont increase your credit card limit Instead of finding ways how you can accommodate Christmas expenses, work within your current limits. So if your current credit card limit is low because this is manageable, then leave it low. Dont increase your card limit so you can buy more. This could potentially push you over the edge financially and end-up costing you hundreds in interest.
Set yourself a budget before you start buying Rather than just spending, sit down and write a budget. This will allow you to spend effectively without giving yourself a nasty surprise financially.
Make Christmas celebrations affordable If youre having Christmas lunch or dinner at your place, then dont buy everything. Instead, make sure you ask your guests bring their own drinks and nibbles, and a dish to eat. This will keep your costs down and ensure that everyone has plenty to eat and drink.
Buy Christmas presents after the festive season Most stores have sales after Christmas, so get into the habit of buying next years gifts early, so that you can save more. Of course, this means being budget conscious throughout the year so that you can save enough to go Christmas shopping right after Christmas. But, once youve managed your first year, then it will be smooth sailing for any subsequent years.
Paying More Off Your Home Loan Over Christmas
Sure Christmas is a time for giving, but its also a time for you to consider your own expenses and to spend wisely so that you dont overspend. According to research, Australians put over $26 billion on credit over Christmas in 2014, with many people taking months to pay this debt off.
Of course, with the average Australian credit card debt being around $5,000 per person, some people still have some Christmas debt left. This equates to a whole lot of profit for credit card companies.
So rather than being caught by the Christmas spending bug, think smaller gifts that save you more. Then the money that you save can then be paid off your home loan. Lets look at how this can be done.
1. Open a Christmas savings account If youre looking to stick to a budget so that you can save more, then open a separate account for Christmas gifts. Then try and match what you put into this account dollar-for-dollar so that you reduce your home loan.
2. Eliminate non-essential spending If you buy your lunch every day and a coffee on your way to work, then its time to stop. Lunches typically cost around $10-15 and a coffee $5. This adds up to $15-20 a day or $75-100 over a week. Over a year this equates to $3,900-5,000 that you could be paying off your house.
3. Use your offset account If you have an offset account attached to your mortgage, then use this to save for Christmas. The more you save, the less interest youll pay on your mortgage.
4. Make gifts Rather than buying gifts this Christmas, make them. You can make soaps, candles, chocolate dipped strawberries and a multitude of other gifts that family and friends will love.
5. Sell unwanted goods Go through your home and cupboards and put everything you dont use into a plie, then sell them at a garage sale, swap meet, or on eBay. You can then use some of the proceeds to pay for your Christmas gifts and the rest can go on your home loan.
6. Use credit card bonuses Some credit cards have points that they accumulate for frequent flyers or gifts. If youve accumulated points, then use these to purchase gifts or for any holiday season flights to save you more. The money you save can then paid off your mortgage.
Are you looking to pay more off your home loan? Then talk to eChoice, we can help YOU save more.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!