For most, the December holidays may feel like a distant memory, but for many, the continuing reminder of the festive period is an enduring credit card debt – and the April holidays are almost upon us, too. It’s easy to let spending get away from you during any holiday season as time spent with the family can inspire a bit of a devil-may-care approach to spending, for the sake of maximising the enjoyment of your time together.
The abiding memory of your holiday time should be of the fun you had with your family or the things you did to regroup and recharge – not the pile of bills you racked up. Be smart with your spending and set yourself up for a healthy financial return to ‘reality’ when the family fun time is done…
The obvious first step is to establish a holiday budget – and stick to it. Understanding what funds you have to spend on holiday fun is the right place to start – and then mapping out how much you can afford for each element. If you’re going on holiday, consider an ‘all inclusive’ option which often delivers lower travel and transfer costs, along with accommodation, meals and even some activities – meaning that you’ll have a clear handle on exactly what your breakaway is going to cost you.
If you’re staying at home, keep tabs on how much you can spend on entertaining – the cost of dinners with friends and family at restaurants, as well as activities, can add up quickly and make your usual monthly food and entertaining budget disappear in record time.
Get a handle on your creditworthiness, with a free (once a year) TransUnion credit report, to help you manage your money better.
Many of us learnt the value of money, by earning ‘pocket money’, in cash. Receiving that cold currency was a special moment – and deciding what to spend it on, before handing it over at the till, took a lot of reflection. Swiping a card isn’t as meaningful as it mentally defers the payment for a later stage, meaning that you don’t have that immediate jolt of parting with your cash. Be safety-conscious when it comes to carrying cash, but try paying for one shopping trip or entertaining session with actual banknotes and see how your perception of how much you ‘need to’ spend, changes.
Almost every retailer and bank has a loyalty program of some description, which earns you points or rewards for regularly shopping or spending with them – but how often do you check your balances? Take some of your down time over the holidays to investigate the status of your loyalty accounts – you may find you have some extra ‘points’ to spend to help you with your costs, or a special offer that makes sense to take advantage of.
There’s no reason to get yourself into debt by splurging on any kind of holiday gift or a haul of expensive Easter Eggs which won’t see the end of the day – focus instead on making memories with your family that’ll last longer than an electronic gadget that’ll be obsolete in a year. Give the gift of an experience or an item that has greater sentimental value – not a greater cost.
Is that deal, really a deal – and if it is, is it something you really need? Retailers rely on holiday season spirit and the odd tug of the heart strings to generate extra sales at a time when you’re relaxed and enjoying yourself with the family. If it’s a big-ticket item that you’ve been eyeing for a long time, consider whether it actually fits into your budget before taking the plunge. It can also be tempting to consider bulk deals that look like amazing specials – but consider whether you’ll ever use the entire quantity of product on offer – especially if it has an expiry date.
Part of assessing how much you can afford to spend at a given moment is understanding your debt-to-income ratio – your monthly debt commitments, versus your income. Credit providers take your affordability into account when assessing you for credit, in the same way. To work out your debt-to-income ratio, add up all your monthly payment commitments e.g. school fees, rent, car repayments – not including discretionary expenses like groceries and entertainment. Divide this by your net monthly salary to get your debt-to-income ratio, with the TransUnion scale considering 0-20% ‘good’ and anything above 41% considered being ‘at risk’.