Avoiding the holiday debt hangover

Ashleigh Peltz • December 10, 2018

We’re coming up to the festive season and for all its fun and frivolity, it’s also a time when we loosen the purse strings to accommodate the excess.

We all know there’s nothing worse than starting the New Year with unpaid debt. Making a solid plan for your silly season spend can make a big difference and will help you avoid a holiday debt hangover.

Psychology of the frenzy

The Christmas frenzy is pretty powerful. Even the biggest Scrooges in our midst can succumb. And it’s not hard to see why. We are bombarded with marketing from all corners at this time of year leading us to make purchases we normally wouldn’t without really giving them much thought. This can all be rather fun in the moment but can result in anxiety come January, when the credit card bill is due.

One way to manage this pressure to spend is to be aware of the psychological concepts marketers employ to turn a sale. Scarcity theory is a big one.(i) Creating the perception that an item is limited in some way is a great way to close a deal. And Christmas provides a line in the sand that few can resist.

There’s also the fact that the brain produces dopamine when it anticipates reward rather than upon receiving the reward itself.(ii) The hype and anticipation around Christmas provides a dopamine hit making it hard to resist the sensory overload of the decorations and carols when you hit the shops.

Remind yourself what it’s really about

The best way to counter this marketing frenzy is to remind yourself what Christmas is really about for you and your family. For most of us it’s reconnecting with our loved ones, sharing a meal, and finding some way to give back. This doesn’t have to be material in nature. There are plenty of ways to show someone you care that don’t involve expensive purchases. Giving someone your time, or lending them an ear, can often be so much more valuable.

Now’s also the time to have the chat about Christmas values with your children. Kids are particularly susceptible to the holiday hype. And if you want to maintain your budget and avoid the sulks come Christmas morning, setting some boundaries around what they can expect gift-wise can be helpful (Santa may have some limitations on what he can carry).

Avoid unnecessary debt accrual

The average Australian credit card holder spent $3342 on plastic in December last year.(iii) Worryingly, many were unable to pay it back for months, often accruing unnecessary interest. Credit cards can be handy if used correctly. But you need to ensure you have the cashflow to meet your repayments. Having a holiday season budget will help here.

Another trend to be aware of is Afterpay. A bit like layby except you get the product immediately, for many it is a form of forced budgeting, but for others it can lead to making purchases they can’t afford, and the late repayment fees can really add up.

Cut the cloth accordingly

It’s important to remember everyone has different means and expectations around the festive season. There’s no point trying to keep up with the Joneses if it’s going to put a dampener on the rest of your summer. If, on the other hand, you’re one of the lucky ones who has the ways and means to live large at Christmas, remember not everyone does.

We call it the silly season for a reason. And there’s no harm in spending a bit more in December in the name of fun and family. We all have our limits however, and knowing yours could help you avoid a holiday hangover in the New Year.

Avoiding post-Christmas debt

  1. Make a list (check it twice!)
  2. Set a budget and stick to it
  3. Shop around for the best deals
  4. Watch the use of credit cards and Afterpay

 

ENDS

 

(i) http://theconversation.com/the-psychology-of-christmas-shopping-how-marketers-nudge-you-to-buy-88011

(ii) https://www.theguardian.com/science/punctuated-equilibrium/2011/aug/11/1

(iii) https://www.news.com.au/finance/australians-are-being-warned-not-too-overspend-on-their-credit-cards-this-christmas/news-story/2cf080bfd59c545f9b9e34770c564f95

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After an incredible career dedicated to supporting regional businesses, farming families and rural communities, BMO Business Centre Partner Adrian Rasmussen will officially retire from the partnership effective 30 June 2026. For many across the Western Downs and beyond, Adrian has been far more than an accountant or advisor. Over decades in business, he has built trusted relationships grounded in honesty, loyalty and a genuine understanding of regional life and the people who live it. Adrian’s connection to the country and agriculture has always been at the heart of who he is. He has worked alongside generations of farming families and business owners through seasons of growth, challenge and change, becoming a steady and respected presence for clients, colleagues and the wider community alike. Reflecting on his time at BMO, Adrian said the relationships formed throughout his career have been among the most rewarding parts of the journey. “It has been a privilege to work with so many wonderful people over the years; not only clients, but colleagues and communities who have become lifelong friends,” Adrian said. “Regional communities are built on relationships, trust and supporting one another, and I’m incredibly grateful to have been part of that throughout my career.” BMO Business Centre Managing Partners Kelvin Tyler and Michelle McVeigh said Adrian’s contribution to both the business and the region would leave a lasting legacy. “Adrian has played an incredibly important role in shaping BMO into the business it is today,” they said. “His care for clients, commitment to regional communities and calm, practical approach have earned enormous respect across our industry and the communities we serve. While we will certainly miss having him in the office, we are excited for Adrian and his family as they enter this next chapter.” While stepping away from the partnership, Adrian is looking forward to spending more time with family, on the farm and enjoying a well-earned change of pace after many years dedicated to supporting others. Everyone at BMO Business Centre extends their sincere thanks to Adrian for his years of service, friendship and leadership, and wishes Adrian and his family all the very best for the future.

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