Here are some simple tips to help avoid the Christmas Credit Crunch:
Set a budget
Write a list of everything you need to buy—from festive foods to gifts—and decide on what you are willing to spend. Then stick to it. Often the hardest challenge is staying within your allocated spend, but if you do, you’ll be far more merry in January.
When compiling your list, ask yourself if there are any viable alternatives to spending money. Can you arrange a Kris Kringle, where a group agrees to buy one gift each for a member whose name they randomly pick? Can you pool together and buy group gifts? Can you offer some manual labour to a loved one instead of a material item? Can you shop at a discount outlet, or buy in bulk?
There are many options available; you just need to be creative, and your bank account will be very thankful.
Decide on your resources
There is an old saying that cash is King. And the saying is a good one. Spending beyond your means is not only dangerous, but anyone who genuinely cares for you would rather you didn’t put yourself in unmanageable debt to give them a gift.
If you are going to use a credit card, be careful and make sure you know what you’re getting into.
Know the true cost of credit
How familiar are you with your credit card’s interest, fees and charges? Do you know what order your credit card payments are applied to your debt? Are you aware of the difference between making a repayment and simply reducing your total debt?
Credit cards are tricky little objects that often have a range of interest rates for different services, such as balance transfers, cash advances and retail purchases. They also have a hierarchy of how they apply your repayments, which you might find is by directing your repayments to the debt with the lowest incurring interest. There is also a range of fees that can quickly increase your debt levels.
Look up overdraw fees, annual fees and cash advance fees (the last is often the least understood and the most costly).
If you’re not familiar with how your credit card works, request a copy of the terms and conditions from your bank. Credit card debt can quickly accrue, and it is one of the hardest debts to shift.
Keep your head
Before getting credit happy this Christmas, think about whether you really can afford the consequences. If your friends or family are adding to the present pressure, be honest and tell them that you simply cannot afford to overindulge. You might find that many people will be just as relieved that they too are relieved of their present-giving duty.
For more information on avoiding credit troubles visit www.usecreditwisely.com.au