Clear and PRESENT dangers

Esther Taunton reports on how to survive the holidays in good shape, and get back on track if it all goes wrong.

Christmas is the single biggest financial challenge of the year for many people. It can be easy to get carried away with shopping for presents, food and drink, and even the most dedicated Christmas planner is likely to feel pressure during the festive season.

But it is possible to celebrate without emptying your wallet or maxing out your credit card.

Here’s how to survive Christmas with your finances intact and not spend the next 12 months paying off the December damage.

Stick to your budget and avoid bad debt

In an ideal world, we’d all have started and finished Christmas shopping weeks ago and there would be no desperate throng crowding The Warehouse come Christmas Eve.

Shopping early just makes sense – there’s no time pressure and, in an ordinary year, there’s plenty of stock on shelves.

But 2021 is anything but an ordinary year. For weeks, those in the know have been urging New Zealanders to plan ahead and shop early as Covid-19 continues to put the squeeze on supply chains.

Although the horse hasn’t quite bolted, it does have one hoof out the stable door and if you haven’t started shopping, don’t delay any longer.

Last-minute shopping leads to rash decisions and overspending that can come back to bite you in the new year.

Shopping with a list and a budget avoids all that so before even setting foot in a shopping centre or heading to your favourite

website, have a clear idea of what you’re looking for and how much you’re willing to spend – and be firm about it.

In excellent news from Consumer NZ, head of content Caitlin Cherry says you don’t always have to shell out big bucks to get a quality present.

‘‘Just because a brand is expensive, it doesn’t always mean it’s much better than some others on offer. We recommend doing your research before you hit the shops.’’

Consumer NZ pulled together test results for items including tech products, home appliances and tools, and found budget options performed well in a number of categories.

Categories where cheaper brands performed as well as or better than pricier versions included smartwatches, stick vacuum cleaners (possibly not the best Christmas pick), and Bluetooth speakers.

If there’s a specific item you’re looking for, price comparison site

PriceSpy is an incredible tool. The site gathers prices from multiple online shops, making it easy to compare and find the best deal.

Buy now pay later only if you can

There was a time when many shops offered a layby system where shoppers made regular payments on an item but didn’t collect it until it was paid off.

These days, when instant gratification is the goal for many, we have a host of buy now, pay later services.

The services, including Afterpay, Laybuy and Humm, offer what are essentially interest-free loans repaid over a short period, usually four to six weeks.

Although the idea of an interest-free loan is an attractive one – certainly more appealing than a credit card with an interest rate in the high teens – buy now, pay later services are estimated to cost shoppers more than $10 million a year.

A Consumer NZ survey found almost four out of 10 consumers use buy now, pay later services.

Chief executive Jon Duffy said the payment option was heavily promoted, with companies keen to emphasise it was interest-free.

However, customers who couldn’t make repayments on time were charged late fees.

‘‘Our survey found 14 per cent of consumers had been stung with late fees. Based on the amount charged, we estimate late fees are likely to add up to more than $10 million a year,’’ Duffy said.

Fees range from $3 to $15 for every missed payment, added to the amount outstanding, so it pays to pause before purchasing.

While you might have the funds to cover the deposit due at the time of

purchase, if you have any doubts about subsequent payments, don’t buy it.

It is also important to keep a handle on the number of purchases made this way.

One $15-a-week commitment might be easy to pay off but rack up three or four similar bills and you’re quickly looking at repayments of $60 a week or $240 a month – an entirely different beast.

A final note on shopping

Given the tough situation many small businesses have found themselves in due to Covid-19 lockdowns and restrictions, if you can visit a shop in your neighbourhood or one of your favourites has an online store, consider shopping there, rather than at a big-box retailer.

Shopping locally doesn’t mean you have to spend a fortune on a boutique item.

Set a budget and stick to it – that might mean buying something other than the item you would have picked up at a chain store but smaller can be just as beautiful.

If it’s all gone wrong

MoneyHub founder Chris Walsh says January and February are a busy time for the financial research website as people take stock of their Christmas spending.

Many people don’t know where their money goes and while examining your spending can be confronting, it is crucial to getting back on track, he says.

‘‘Have a look at your bank accounts over the past two or three months and really get to know what you’re spending and where.

‘‘It’s like a financial ice bath – it’s probably not going to be fun, but it’s worth feeling a bit uncomfortable for a few minutes.’’

Every spend, from insurance and phone plans to gym memberships, should be challenged.

‘‘Work out what you actually use and get rid of the rest. There are several movie and music streaming services out there, that doesn’t mean you have to subscribe to them all.

‘‘If you only use one, get rid of the rest.’’

Once you have an idea of your spending habits, Walsh recommends downloading a free budgeting app. ‘‘This will help you start the year

strong and feeling

more in control.’’ MoneyHub’s guide to the apps has options to help budget for bills, alert you to when your bank balance is running low, and even split expenses among groups, like flatmates or families.

Several of the apps automatically (and securely) sync with New Zealand bank accounts, and lay out your financial situation in a graph or table.

This can help with cutting back on things that don’t matter, so you can

divert money into clearing debt, Walsh says.

Many banks offer no- or lowinterest credit card balance transfer deals in the new year, some for up to 24 months, which can significantly ease the pressure.

Paying 0 per cent interest (rather than 20 per cent) on uncleared balances means you can pay off what you owe without having money diverted to interest costs.

‘‘A $5000 balance dragged through 2021 at 20 per cent per annum will cost $1000 in interest alone, which is a waste of money,’’ Walsh says.

‘‘But no or low-interest deals aren’t any good unless you commit to paying the balance off and stop using your old card.’’

Walsh’s final word of advice is to take action sooner rather than later.

‘‘Once February starts, it’s too late. That’s the start of another year of debt slog.’’