Emergency budget cuts

Is your head starting to explode as the financial holiday hangover kicks in? You’re not alone. According to Paymark, which processes 75 per cent of New Zealand’s electronic transactions, we set some serious shopping records this Christmas.

According to Paymark, we were making almost 160 transactions per second on Christmas Eve – that’s huge! Overall, Paymark’s initial December data showed strong spending growth throughout the country for December – up almost 8% to $5.493 billion for retail’s busiest month of the year.

The weight of holiday spending can be heavy, no matter what the total damage of all your spending really adds up to.

If your money situation is now looking dire, it’s time to face the consequences of impulsive spending and take back control. First up, make a list of what you owe and match it against your expected income. I’m betting there’s a gap there you couldn’t jump over. And there are only two broad ways you can narrow that gap – slash your spending or bump up your income. Here are some suggestions that may help ease the squeeze in your situation.

Start with the high interest debt

One of the golden rules of financial planning is to clear your most expensive debts first. That’s likely to be your credit cards, the biggest culprits of post-holiday debt. If you are overwhelmed with the amount of high-interest debt you have, consider consolidating it all into a personal loan. Our ratings  show personal loans are very competitive at the moment; the average interest rate for an unsecured loan is 17.38%, but there are rates as low as 9.99% for those with a good credit rating and a talent for negotiation.

The average credit card interest rate, on the other hand, is closer to 19. Admittedly there are lower rate cards on the market and there are also plenty of zero percent interest rate offers around. What you need to weigh up is whether or not you honestly believe you can pay off the debt within the interest-free period. If you can’t, the higher interest will kick in on the remainder. There’s also the temptation to keep spending on the card and keep topping up the debt. Depending on your personal spending habits, it might be better to roll the debt into one personal loan and when it’s paid off in monthly instalments it’s paid off forever. So consider your options carefully.

Refrain from using your credit card

If your credit card debts are maxing out your budget, try not to incur even more debts after January. Continuously racking up credit card debt will not help. If you are an impulsive buyer, avoid going to places which will stimulate your shopping senses. And keep away from visiting online sites where you will be inundated with tempting offers and deals.

Focus on generating more money

Can you add to your income to try and pay off your debts? This could take the form of doing more overtime or taking on a part-time job. Do you have an added skill someone will pay money for – such as teaching people how to play the guitar? Sometimes a little resourcefulness pays off when it allows you to make additional money to cover the debt hangover left after the holiday season.

Return unwanted gifts

We get a lot of gifts at Christmas that we have no intention of using. Return what you can for cash and gift cards. Sell anything else online. Use any cash to pay your debt. Save gift cards for bigger expenses during the year (birthdays, weddings, even next Christmas) to reduce your ongoing shopping expenses. Be mindful of gift card expiry dates though!

Hold off on shopping

Until your debt is under control, try to cut right back on discretionary spending and shop only for food and essential clothing. Speaking of food, never hit the supermarket without a shopping list – and always stick to the list. These giant museums of food have spent millions on tricks to make you put stuff you don’t want in oversize trolleys, keep in the fridge for a week and then throw away. Dig out recipe books, plan your meals (and leftovers for lunches), make a list and buy only what you need – and check out these ways to save money on groceries.

Make lunch – holiday round the world

You might well spend a conservative $15 a day on lunch at work – that’s $8.50 for a sandwich, plus $4.50 for a coffee plus $2 on some sort of snack. It’s nothing, is it? It’s only $15 a day. Or $75 a week. Or $3,900 a year. Or the cost of a luxury family world trip after a mere five years. Over your working life you can easily chomp away more than $156,000. And you know what? An awful lot of people spend considerably more than $15 a day. In today’s workplace, we are now more likely to be friends and socialise with colleagues, which has extended to eating out for lunch and meetings in coffee shops rather than meeting rooms. While making your own lunch isn’t free, remember a sandwich is just bread with some stuff in between. And for the price you pay on such a regular basis, does the coffee really taste that good?

Everyone loves a quitter

Smoking is a real hit to your hip pocket, and with the latest government tax increase in effect from 1 January this year, it’s even more expensive than it was before!

With the government’s latest tax increase, a pack-a-day smoker can save around $7,400 each year if they give up the deadly habit (based on $20.50 for a packet of 20). This hit to the hip-pocket nerve of smokers is something not to be ignored. Quitting is by far the best thing a person can do for their health and if that’s not enough incentive, thinking about how to spend all that extra cash is a great motivator. By funneling money that would be spent going up in smoke into your bills instead, you’ll find yourself making real inroads into those hard-to-shift debts like credit card debts.

I realise giving up smoking is not as easy as it is for me to type the words. It is a real addiction and affects everyone in an entirely different way but the thing is that quitting is not impossible. There is also plenty of help and support available. Phone the Quitline on 0800 778 778 or go online to http://www.quit.org.nz/ .

And while you’re thinking about quitting, are you still happy shelling out $50 a month by direct debit to a gym you never go to? If you use the gym three times a week, great. If not, consider running home from work three times a week instead. It’s free.

Learn to say ‘no’

It’s easy to give in to the demands of a screaming child in a packed supermarket on a Saturday afternoon. ‘Get me that toy, I want that toy. I know it’s poorly made and won’t last the car trip home. But I’m six and I want one. It’s only $10!’  Similarly, a quick drink with friends after work can turn into swamping down the best part of fifty bucks or so. Saying ‘no’ a few times a year will do wonders for your bank account.

Live like a student for a month

We all remember what it was like to make things happen on a small amount of money when we were students. Go back to that thinking. Find free entertainment – if you have kids, get them involved in this project – stay in and cook, enjoy some quiet time after the hectic holidays. Leave the car at home and cycle where you can, or take the bus.

Capitalise on extra repayments already made

There’s a reason we urge people to make extra repayments on regular debts – such as home loans, car loans, personal loans. It means you can actually take time out from making these repayments when the financial going gets rough. If you are really and truly stretched and can’t pay one of these debts for a month or so (depending on how many extra repayments you have already made over the past year or two), call in the favour and talk to your lender to confirm your intentions and make sure there are no penalties involved. After the emergency is over, go back to making extra payments on your loans because it can be a godsend when desperately needed.

Learn from your mistakes

Takes notes or even a photo of your invoices to remind you to keep your shopping under control next year. Plan to save 5 or 10% of your income this year. If you are saving nothing, start small and move up. Make a promise to yourself that you will never again be in this position as a consequence of poor planning and lack of control over spending during the holiday season. The stress is simply not worth it.

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