Clever ways to avoid overspending this holiday season
OPINION: It’s easy to confuse the holiday spirit with excessive spending.
Malls are brimming with indulgent gift ideas, and it’s all too easy to get caught up in festive season expectations of how to spend your money.
According to Retail NZ, Kiwi consumers are expected to spend even more this holiday season — but thankfully, you don't have to be one of them.
Making smarter choices with your money over December can help improve your financial standing in the year ahead. Here are seven easy ways to avoid falling into the trap of spending beyond your means.
Don’t fall prey to ‘expectations’
Your son wants the latest Xbox, your sister is eyeing a NutriBullet, and your partner has his/her heart set on a new espresso machine. Driven by a need to please and delight others, all too often we buy what our friends and family would love rather than what we can realistically afford. This year, focus on finding ways to demonstrate how much you care while staying within your budget. Remember, a thoughtful gift can be more meaningful than an expensive one.
Create a spending plan
When shopping for Christmas gifts or booking your holiday away, start by drawing up a budget. You can’t track what you can’t see. Write down your total ideal spend at the top, and then break down each expected expense beneath it.
It’s especially important when going to the mall not to leave home without a clear list of what you’re buying and for whom. There are a million ways to overspend at the mall; your list will help keep you on track.
In the same vein, if you’re travelling over the holiday season give yourself a daily spend limit. Not only will it help you to avoid overspending, it will give you the freedom to enjoy your holiday without stressing about money.
Rethink your holiday expenses
One of the easiest – and fun – ways to control your spending is to rethink what you’re purchasing and redirect it into things you truly want.
We tend to spend more on food, wine and clothes over the holiday season – but it’s important to ask yourself if all your expenses are really essential. Rethinking your purchases over this period can lead to some pretty awesome opportunities.
For example, instead of eating out for each meal during a seven-day holiday, you can save enough for a return, off-peak flight to Melbourne by going out for one meal and cooking the rest yourself.
Starting new traditions is a great way to rethink costs – such as implementing a gift limit, taking a Secret Santa approach where you only buy one gift, and doing a potluck Christmas lunch where the cost of food is shared. Selling surplus items sitting in your garage is another way to boost your funds, and in that way reduce the amount leaving your bank account, over the holiday period.
Redirecting some of your spending money into savings – even a portion of it – can give your saving a purpose. It allows you to have fun with your money plan and may help create the experiences you want within your existing budget.
Take advantage of Boxing Day sales
Giving a voucher may seem impersonal, but it’s a great way to give a tangible gift on December 25 and take full advantage of post-Christmas sales.
If you have children, giving a voucher means they can choose exactly what they want and they’ll learn about stretching their money and the benefits of delayed gratification. For example, if they get a $100 voucher they may be able to get $150 or $200 worth of toys after Christmas.
Use cash where possible
Physically seeing money leave our hands impacts how we spend. Debit and credit cards makes mindless swiping all too easy. If you’re having a daily coffee during your week-long holiday, you may rethink that $35 expense if you’re physically handing over that cash.
If you are using a credit card to maximise loyalty programme points, be sure to pay the owing amount in full each month. If it’s a challenge to do so, it’s better to use cash over this period. If you’re tempted to swipe your credit card for an unnecessary purchase, ask yourself this: “How do I want to go into the new year – in the red, or with a clean financial slate?”
Pad yourself for unexpected expenses
Unexpected expenses will always be a part of life. The key is to manage these expenses as they arise, and to plan for them as best you can.
If you don’t have an emergency account to tap into, start today by opening a separate savings account and putting aside $50 a week between now and Christmas. This will create a cushion of financial safety should the unexpected happen - such as your car breaking down while on a road trip. Part of your holiday season planning needs to include a little padding for your peace of mind.
Use your 2019 goals as a carrot
As we’re often most relaxed over the holiday period, it’s the perfect time to think about what we want over the next 12 months. Whether it’s saving for a new car, taking an overseas holiday or furthering your studies, it’s important to invest time now in planning ahead. This will not only incentivise you to rein in overspending, it will help you to improve your financial health in 2019.
Studies have shown that by sitting down to write your goals you are increasing your chances of reaching them. Researcher Dr Gail Matthews found that individuals are 42 per cent more likely to achieve their goals by simply writing them down on a regular basis. Use the holiday period to cement what your next set of goals are, write them down, and then speak to your financial adviser about helping you to make them happen.
How to have fun with little or no money
- Go to the beach
Sunshine, soft sand and simple pleasures – a day out at the beach is the perfect way not spend anything for a day.
- Enjoy walks and parks near you
There are some pretty awe-inspiring trails and walks throughout New Zealand. Pack a few homemade snacks in a backpack and enjoy the best of what nature has to offer.
- Save on accommodation costs
If you already own camping equipment, camping can be an economical way to see other parts of New Zealand. Alternatively, try house swapping with a friend or family member who lives elsewhere – this way you both save on hotel or bach costs.
- Go for a cycle
It’s a fun way to see your city. Or if you want to make it interesting, opt for a vineyard cycle tour.
- Use free local attractions
Visit your local museum or art gallery, or find out what your city or town has to offer with zero or low entrance fees.
- Join a library
There are tons of great books, magazines, movies and puzzles to borrow over the summer.
- Bring out fun games for the kids
For example, teach your kids to play Monopoly and see their true money personalities come to life.
Bruce Cameron is an experienced adviser who has 20 years’ experience in the New Zealand financial services industry. Based in Auckland, Bruce has a passion for working with clients to ensure they get practical financial and investment advice that is relevant to their goals.