MANY Australians have a tendency to spend up big during the festive season.
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December and January can be very expensive months, so it is important for borrowers to plan ahead and spend sensibly in the festive season so that they can start the new year without any financial hangover.
As such, in the weeks leading up to Christmas, it is a good idea to take some time out of the frantic festive season to manage your mortgage and financial commitments to ensure that everything is under control, and that you will be spending within your means this holiday season.
If you stick to your budget for food, beverages, gifts and travel costs over the festive season you will ultimately reduce the potential for more personal debt and save money.
If you have a mortgage, another option would be to contribute any leftover savings from your Christmas budget into your home loan.
This will save you time and money off your loan and will help you to cope with any future changes in interest rates.
While the Christmas holidays can present quite a challenge for those managing a mortgage and those looking to enter the property market in the new year, I have come up with a few tips to help you get through the silly spending season by clearing debt rather than creating it.
Create a financial buffer: By repaying your mortgage above the required amount you can ensure that you are financially prepared for the festive season ahead.
By doing so, you will develop a greater peace of mind by having more funds at your disposal, if need be, and it will help with reducing the interest payable on your loan. Revisit your purchases from last year and make a list of things that were not consumed, were left over or unused. Then, create a well thought out, detailed shopping list before you arrive at shopping centre, to save you time and money spent on unnecessary items.
Avoid paying on credit: The easy option for Christmas purchases is always to pull out the credit card now and deal with the expense later. Why not be proactive and put an extra $50 aside each week towards the upcoming festivities, rather than resorting to credit?
Plan for the year ahead and budget for your next summer holiday spending.
Organise your repayment strategy and increase your contributions when you can, start preparing your new year budget and, based on this year's festivities, decide what you can cut back on for next year.
Simply stop and think - sometimes a minute of consideration is enough to prevent impulse buys.
It is important to ensure that your spending during the silly season doesn't impact your ability to meet repayments on your home loan.
For those that are looking to buy in the coming months, keep in mind that you shouldn't dig too far into your savings this Christmas, as most lenders like to see a history of genuine savings that have been accumulated over a period of at least three months.
While sensible spending is top of mind this time of year, be sure to enjoy yourself over the Christmas holidays and reward yourself for sticking to your budget in the lead up to the festive season.
■ Richard Windeyer is a mortgage broker with Mortgage Choice. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. Phone Richard Windeyer on 1800 01 LOAN.