Common Christmas Spending Mistakes You Should Avoid

Post by NeilMc on December 21, 2009 · Under Hints and Tips, Personal Finance, banking, credit cards, interest rates · Comment 

Christmas time is a time to indulge, and unfortunately what the good times mean is that it is also for a lot of people the most expensive time of year and despite our best intentions, it can be so expensive, that many of us end up being in a position where there isn’t enough money to fund our celebrations in the manner we would really want to.

The cost of Christmas can really add up very quickly, whether it’s because you want to spoil loved ones with gifts and presents, or because you want to indulge yourself with good food and fine wine.

Whatever may be your personal flavour, if you aren’t careful how you spend your money over Christmas, you could end up starting the New Year in over your head in debt.

Here are some common Christmas spending mistakes that you should try and avoid.

Don’t Over-Indulge

Over indulgence is perhaps the most obvious mistake you can avoid. It may give you a lot of pleasure buying gifts for kids, friends and family. But that does not mean you should fork over every time for the most expensive presents, for a start they don’t always make the best Christmas presents, and more importantly, most people will understand if you are little short this year and are not extravagant.

The same is true of food. There is no reason to buy a bird that is large enough to feed 10, when you know there are only going to be four of you sharing the meal. If you are throwing a Christmas party, no one will bat an eyelid if you ask your guests to bring the booze whilst you provide the food.

Don’t Carry High Interest Credit Card Debt

If for whatever reason you happen to be financing the Christmas festivities with a credit card, you should make sure that your card issuer isn’t charging exorbitant rates for the privilege of borrowing money.

The easiest way to avoid paying high interest on your credit card spending, is to spend the amount on an existing card and once you are done with your Christmas shopping, transfer the debt onto a zero per cent balance transfer card.

Don’t Be Tempted By Store Cards

Don’t be tempted by 10 per cent of purchase deals offered by stores who say you need to take out a card to avail the deal.

If you do take the deal you need to be extremely financially disciplined and can and will pay of the debt as soon as the invoice arrives, cut up the card and cancel the account.

If you think you may not be that disciplined, then avoid store cards like the plague, they are well known for exorbitant interest rates, in some cases as high as 29 per cent, and a lot of store cards are given to people who just cannot afford to borrow at any price leave alone at 29 per cent APR.

Don’t Exceed Your Overdraft Limit

Overdrafts can be really useful things, and for some of us can really work as life savers when you hit the end of the month, and you need just that little bit extra to help tide you over until pay-day. So long as you have arranged a facility with your lender, you can spend a little more than you have without having to worry about arranging a loan.

Many current accounts these days come with an interest free overdraft facility without having to pay a single cent. The major problem with Christmas however is it means we might need more than is available through our overdraft facility.

If you know you need to borrow more than you can physically pay off in the following month, an overdraft is perhaps not the best option for borrowing money.

Some overdrafts charge in excess of 20 per cent on borrowed money, and in those cases perhaps a credit card is a cheaper option, especially if you transfer the debt onto a zero per cent balance transfer deal.

Save For Next Year

The single best method to pay for Christmas is to save for it. Obviously the last thing you want to think about waking up with a New Years Day hangover is saving money for the next holiday season, but the sooner you start the easier life will be when next December finally arrives.

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