What does it take to keep your head above water at Christmas time? A recent survey shows that the average Australian spends around $1,000 at Christmas, which is more than they can afford. And so they turn to credit. We look at the ramifications of letting credit pull you under at Christmas and holiday time, and look at recommendations for having a happy stress-free, debt-free Christmas and a clear credit rating in the New Year.

By Graham Doessel, Founder and CEO of MyCRA Credit Rating Repair and www.fixmybadcredit.com.au.

This year more than ever, there seems to be a backlash in reliance on credit. Perhaps it’s that collectively Australians have been reducing their debt levels and trying to save money instead of spend it. So why is Christmas so different? Is it where we remove all of our previously frugal thoughts and blow the budget just to make the ones we love ‘happy?’ According to a recent news story – this seems to be the case.

Yesterday Australian Broker featured an article ‘How to avoid a post-Christmas financial hangover’ and there were some interesting statistics about Australia’s Christmas debt numbers.

Suncorp head of advice, Stephen Daly, told Australian Broker that over the festive season many consumers will turn to credit to fund Christmas celebrations despite saying they can’t afford the splurge:

• 40% of 35 to 49 year olds will use credit to cover expenses they couldn’t otherwise afford, even though 60% of them feel stressed over their financial situation;

• 25% of 50 to 64 year olds will use credit to cover expenses, even though 60% of them feel worried about their financial situation.

But Daly says it doesn’t have to be this way. He says there are three major things consumers can do to prevent post-Christmas financial regret:

1. Set a realistic budget within your financial means, and stick to it;

2. Plan ahead for gift purchases – leaving gift buying to the last minute can lead to spending too much in a state of panic.

3. Think about gift buying in the categories of what your loved ones “want”, “need” and “a little luxury” – that way you approach the task of gift-buying in a more considered way.

“These simple tips can mean the difference between blowing out your budget in December, and paying it off over years in high interest, or removing the debt-stress.”

Also, Daly says, it might be a good idea for Australians to re-think Christmas as a special time of year to spend quality time with loved ones, rather than being measured by the amount spent on presents.

“It might seem like a great idea to give your loved one the iPad they’ve always wanted, but if you can’t afford it, the stress of the debt isn’t worth it. Our planners see people in January and debt can often be a cause of unnecessary stress when families over-extend themselves in December.”

This unnecessary stress can lead to accounts in arrears, and all of a sudden the New Year can be looking pretty grim, with defaults on your credit file that could not only ruin next Christmas, but the next several.

Defaults showing on your credit history can stop you from getting credit with most mainstream lenders, and a default will stay there for 5 years – so it’s important to avoid this at all costs.

On November 1, we urged everyone to ‘get organised’ for Christmas  to save money and their credit rating – but life happens sometimes and you could be only now thinking about presents.

So at this stage – it is important to stay firm if you don’t want credit to get away from you at Christmas. Here’s our Christmas budget tips:

1. Write a budget. Only got $500 to spend this year? Then budget for that. With a little forethought you might be surprised at how well you can make your money stretch.

2. Write a Christmas list – decide who to buy for, what to buy, where you will buy it from and how much you will spend (Christmas catalogues can be good for this).

3. Don’t deviate from your original plan! Don’t be swayed by fancy lights and ‘bargains’ at the shopping centres – try to get in, stick to the list, and get out while you still have your sanity and your money in your wallet!

4. Consider some handmade gifts or bulk gifts such as charity donations on your loved ones behalf as ways of keeping your budget down.

And…..5. It’s not too late to suggest a ‘secret Santa’!

Also, if you are having time off over the Christmas/January period, diarise to make a day to sort out your finances and include sending away for a free copy of your credit report in this list. Don’t let all of your hard savings work go down the drain because you have errors on your credit file that you don’t know about until you apply for finance. Get your credit rating repaired now while it’s not urgent and enjoy the New Year with a clear credit rating and financial freedom. For more information contact a Credit Repair Advisor on 1300 667 218 or our website www.mycra.com.au.

Image: Stuart Miles/ www.Free.DigitalPhotos.net