By Leah Oliver, founder of Minnik Chartered Accountants
It feels like all we have to do is blink and Christmas is upon us – our days are filled with work, school, homework, sports commitments and other activities and this year we have COVID-19 in the mix. All of a sudden, the silly season is now starting to approach.
Christmas is such a busy time. Planning the holiday. Buying the gifts. Entertaining the family and friends. Entertaining the kids (and their tribe of friends) on school holidays. Feeding the masses! Do we plan for this time financially? The answer is, in the majority of households – no.
If there is no planning, how do families survive the ride through Christmas? Observations show a tremendous increase in the use of credit cards, and mortgage offset drawings during this time of year.
There is a definite sense of “get it now, deal with the consequences later”. Unfortunately, this leaves families in a situation where for the first three to six months of the new year they are recovering financially from the impact of Christmas.
This then leads to a vicious cycle as it doesn’t leave much time before the next Christmas rolls around! And so, they inevitably end up in the same position next year.
So how do we fix this situation? The answer lies in understanding your personal financial affairs.
Here are my top tips to get yourself in the best position to keep control of your Christmas spending:
1. Treat your personal family life like a business – Start by tracking your everyday household cash in, and cash out. This will allow you to see a clear picture of what surplus you have to work with.
2. Divide your Christmas expenses into separate categories and add these to your household budget. For example – Holidays, Gifts, Kids Activities, Entertainment.
After these expenses have been accounted for in your budget, you should always be in a “profit” or “surplus” position to ensure sufficient funding is still being directed to your investments. If this figure is negative, it is clear that you are reaching for credit cards and debt to fund your lifestyle.
If your household finances are still a little tight, your situation can be improved by:
- bringing in alternative income streams;
- enhancing existing income streams;
- replacing high energy, weaker income streams;
- pulling back on expenses that are unnecessary or excessive.
It is remarkable the change we see in families who embrace this concept and take control of their financial position. Until you can accurately identify your actual personal income and expenses, you will always be spending on things without knowing if they are affordable at that point in time. In other words, “flying blind” with your money.
Don’t let another year go by dealing with the financial stress of Christmas on your family. Plan well in advance. Embrace the new year with a positive position. Enjoy the Festive Season!