The Finance Bible

OD #2 - 28% of People Are Trapped in Holiday Debt for a Year—You Need to Hear This to Avoid It!

• Oscar Don

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Could you imagine starting the new year burdened by last year's holiday debt? In our latest episode, we unravel the secrets to sidestepping this all-too-common pitfall and stepping into financial freedom. With a staggering 28% of individuals still haunted by holiday bills a year later, we offer a fresh perspective on holiday spending. Discover how treating it like a regular monthly expense and adding a safety buffer can transform your approach. We promise you'll walk away with practical strategies to break free from the holiday debt cycle and a newfound confidence to enjoy the festive season without financial stress.
 
 Beyond budgeting, let's explore creative and heartfelt ways to celebrate that won't break the bank. From outdoor activities to the art of giving handmade gifts or time vouchers, this episode is packed with ideas for meaningful connections without overspending. We highlight the power of using cash or debit to curb unnecessary debt and keeping expenses in check by tracking them in real-time. Our focus is on shifting your mindset: prioritise gratitude and connection over costly gifts and extravagant celebrations. Start the new year with a clean slate and a refreshed financial outlook, cherishing those important moments with loved ones over financial burdens.
 
 For any enquiries or to connect with Oscar, Zeke, or their company, Asset Road, listeners can visit the following links:

The advice shared on The Finance Bible is general in nature and does not consider your individual circumstances. The Finance Bible exists purely for educational / entertainment purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs.

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Speaker 1:

28% of people who go into debt during the holidays are still paying it off an entire year later. Imagine starting January already buried under last year's bills, stressed out and wondering how to make ends meet. And here's the kicker holiday debt isn't just a January problem. It's a freedom problem. You can't achieve financial independence if you're stuck paying for last year's Christmas. In this episode, we're sounding the alarm and giving you the exact steps to break free from the holiday debt trap. We're going to uncover why 65% of people feel stressed when the holidays roll around and how you can avoid being one of them. This is your wake-up call. Don't miss it. Welcome back to another episode of the Finance Bible Podcast. Zeke here and your co-host, oscar. But before we get into it, please note that nothing in this podcast should ever be considered as personal financial advice. Of course, if that is what you are seeking, reach out. We'll get you in touch with the correct professionals. Get the job done properly. Sit back, relax and enjoy the show. Let's get into it. Welcome back to the Finance Bible Podcast today. You are with myself, oscar, for another episode. A couple of weeks I'll be with Zeke in person. So we'll be doing a traditional one-on-one podcast there, which I'm looking forward to, but today we're going to be jumping into how to never get in debt during the holiday period again. So what I'm talking about is you finish work in December, you've got a couple weeks off. You might have two, three, four weeks if you're lucky and you're in a rush. You need to buy those Christmas presents. You might be hosting Christmas, you might be hosting a New Year's party and then all of a sudden you've got all these expenses coming and then you feel like you're kind of drowning in debt. This is really to help you and to help anyone out there who feels like when Christmas comes, they're instantly stressed because the first thing they want to think about is the money side of things. So how can we avoid this for next December? An alarming fact about Christmas and spending is 28% of people who go into holiday debt are still paying it off a year later. Are you one of the 28% still paying off your debt from Christmas or New Year's or might've been a trip 12 months later? Did you put it on a credit card at the time and said you're going to get around to it, but you're still slowly struggling to pay that debt? Well, on top of that statistic as well. 65% of people report feeling stressed about holiday expenses, and this stress can overshadow the joy of holidays and spending time with your family because you're stressed about money.

Speaker 1:

The good news is, with the right system and mindset, it's actually very, very simple to avoid this cycle entirely, and that's what I'm going to show you in this episode. It's quite a basic, simple mindset shift. Slash a formula you do, but it really helps you down the track. So you got to treat Christmas like a monthly bill. That's the first step. When you think of Christmas, it's a monthly bill which you need to pay for and put aside.

Speaker 1:

So one of the biggest traps is letting the holiday sneak up on you. You know how it goes. You have New Year's, you start the year off, then it's March and then it's May and then it's September. Then all of a sudden it's December and You're freaking out. You've got Christmas, you've got money to spend. You've realized that you actually haven't hit your goals for the amount of money you have. Hopefully you have, but in a lot of cases and, as you can see, 65% of the population don't hit the goals that they're putting aside for themselves of the money and feeling stressed. So then your credit card is going to get a workout and you fall into the trap again 12 months later, you're still paying it off.

Speaker 1:

The key to this approach you gotta treat it like an ongoing expense, just like your rent, your utilities, your gym membership, whatever memberships you have, your Uber, your Netflix. Put the money aside. So, first thing you need to do, open up your bank statement. Look back at everything you've spent last year in your holiday period. So, once you finish work to when you go back to work, you might have had a little trip, interstate, you might have gone down to the beach, you might have gone to town, you might have gone internationally. Whatever you've done, add it all up, including gifts, including your food, including travel, including accommodation, fuel and anything else holiday related. The key to this, though, is being extremely detail orientated, so you need to make sure that to the cent, because we need to add everything up so that you have a figure, and you may even want to add up two or three years in a row and figure out the average of what you roughly spend, if some years, it fluctuates quite a bit, but this exercise is about getting a clear picture of what the holidays really cost you. So, for example, let's just say last year you spent $2,000 across the holiday period. So you might've spent a bit on some gifts and then you might've been hosting Christmas or you might've gone away for a weekend and it's come up to $2,000.

Speaker 1:

The next thing you want to look at doing add 20% to your total. Why would you add 20%? Well, the reason is expenses often rise unexpectedly so you may have emergencies or last minute gifts. So, for example which I know one for myself I had a secret Santa and I was on my way to the event and I thought I've done all my Christmas shopping and everything's paid for and then all of a sudden I realized I had to spend around $50. So things like that unexpected gifts, last minute gifts, emergencies so yeah, add 20% to the figure that you've added, because you never know what happens. So let's say $2,000, add 20% gives you 2,400. You may not need the full amount. So even if you add 20%, you might not need it, and that's okay. You just roll the extra funds into next year's holiday savings. So you're still going to have it, but you roll it over and worst case scenario or best case scenario, depending how you look at it. If you've got leftover funds, maybe you want to buy yourself a present or take yourself out, or a friend or a partner out for a night out, so that's that.

Speaker 1:

Next, you've got to divide your adjusted total by 12 months, because obviously there's 12 months in the year. So, for example, $2,400,. This comes out to $200 per month, or, if you're a weekly thinker, it's $50 per week. So, just like that, to save your $2,400 for the year, that you need for Christmas is only $50 per week you need to put aside. When you save incrementally throughout the year, the financial hit of the holidays and Christmas feels a lot smaller. $50 a week is nothing. I'm pretty certain that if you go out on the weekend, you're spending at least $50 on dinner and drinks with friends and socializing, but you can also put another $50 aside to decrease your stress. In 12 months time. It's a no brainer.

Speaker 1:

The secret weapon, though, is automating your direct debits, so set up a recurring transfer to a dedicated savings account, ideally one which has a high yielding savings, so that you can get the added benefit of earning a little bit more interest when it does come time for December. As opposed to having 2,400 on the dot, you might have a little bit more $2,500, $2,600. And, as I said earlier, you might want to buy yourself, or someone's been good to you that year, you might want to give them something a little bit extra. But you've got to set it up once of. It might be a weekly direct debit, it might be a monthly, pending on when you get paid, and that's obviously for you to figure. The main thing is you set it up once and then you fully forget it. That's the best thing about it. And then all of a sudden, come November, december, when you start thinking about it, oh look, you've got $2,400 or whatever your amount is, in your bank account ready to spend. So you're not going to be digging into that credit card that you've been using all so many years before, or your savings that you've been working hard to build up that year.

Speaker 1:

Why the system works for so many people? The main reason is it's stress-free. You're going to start the holidays with a stress-free mindset. You know that you've already saved for holiday expenses, so you've reduced your stress and now you can have fun with your friends, family, do what you want to do. Another benefit of this is you're starting the new year fresh. You're not paying off debt that you paid for 12 months ago. You're starting the year debt-free, so you're minimizing your pile of credit card bills, which, for anyone out there with credit card bills and when you pay them, it's a very nice feeling once you've done that. But the main thing is making sure that you automate the direct debit, because if you do that, you don't think about it. It just keeps coming out, obviously, with your own pay, if you're on a higher income as opposed to a lower income, you may have to adjust it depending on what you want to do, but at the end of the day, if you are one of those individuals who get stressed in December for Christmas, highly recommend doing this. Even if you start at $20 or $30 a week, just automate the deposits and start seeing your balance rise up over time and start seeing as well your stress decrease when we're getting to the end of the year.

Speaker 1:

Some other proactive tips for staying debt-free. Number one create a holiday budget and stick to it. So my previous episode I spoke about how budgeting is such an important tool and how I actually used it when I started out, kind of focusing more on my personal finance. I still do today, especially with holidays. Set your budget, set your limit, figure out how much you will spend on gifts, food, you know decorations and events, and then include some limits for each category so you're not overspending when you can't afford it because that's a important one. You might go to the bar and your friends are spending all this money on drinks and you feel like you may have to you know, continue and mirror them and keep spending money as well, but the end of the day, they don't know if you have money or not. So if you know, you're the only one who knows that. So if you know you can't afford it, don't do it. It's as simple as that. Bite the bullet, don't do it.

Speaker 1:

Or socialize doing something free of charge, like go for a run, go to the gym depending on what gym you are it could be an outdoor workout, or just go get a coffee for $3. There's so many different options as to overspending. When you socialize, look at embracing thoughtful and low-cost alternatives. Maybe it's time to shift the focus from expensive gifts to just meaningful gestures. So this may include handmade items, different experiences or a time coupon offering a skill or service you can provide For example, you might think you're a really good masseuse a skill or service you can provide. For example, you might think you're a really good masseuse. You might want to make a little voucher to your siblings or your friends that you'll give them a 60-minute massage. Who knows Something as simple as that?

Speaker 1:

Number three you may want to host a potluck-style gathering. So instead of footing the entire bill for holiday meals and actually hosting people for Christmas Day and buying all the food and everything, you may want to make it a collaborative event. Get guests to bring drinks and dishes and different types of things that you may want Desserts, someone might be good on the salad, someone might be good on meat Typical diversification diversify with your guests so this will ease the financial burden. I myself, I know that our family's done that for the last 10, 15 years anyway, but for those who don't actually do that and someone footing the entire bill themselves, this is an extremely important one.

Speaker 1:

Number four use cash or debit, never credit. Especially in the holiday period, you're a bit more emotional with your spending because in the back of your mind you've realized it's Christmas time, you might have the Boxing Day sales and you might have the Black Friday sales. Not sure, I think that's before, but you've got all these sales coming and obviously, when you get ads pop up on your Facebook feed, on your phone, going out in public, you're thinking, oh, I can save $400 on this. The thing is, if you don't buy it, you save the whole amount. Don't use your credit card, because that's where the mistakes happen and, as you've seen, many individuals are still paying off their debt from the year before. So stick to cash or debit cards to stay within your means. But if you do have to use your credit card, like I know some cases, people have to use credit cards based on pay cycles or things that are happening, which is fine Only if you can pay it off as soon as possible or within a week to avoid any interest charges, because, as we all know, credit cards can absolutely wreck you with interest charges, especially if you don't pay it, and good luck getting out of them, because they make it pretty tough.

Speaker 1:

Last point, number five track your spending in real time. So this goes back to the budgeting in point one. But use budgeting apps or even a simple spreadsheet to keep tabs on your expenses as they happen. So with the budgeting for point one, you may just wanna pop in rough numbers of what you can actually spend on, based on your income per week or per month. But with this point, what this is saying is, now that you actually have spent the money, you've got to keep tracking and adding to the budget at live time. So if you've gone out and just spent $200 on let's just use, for an example, a nice shirt Soon, as you get home you have to add that to your budget and see how much you have left. You may only have $20 left or you might have gone over by $50. And then you're going to have to take 50 off for another category and reduce that.

Speaker 1:

So keep tabs on expenses as they happen, because that is so important. Without doing that, a budget is literally irrelevant. And the most important thing with tracking your spending in real time is seeing your spending in black and white literally helps you stay accountable. It's as simple as that. You can't spend more than you earn because otherwise you're going in debt, and that's a bad place to be, as we know, especially with the Christmas time and holiday season. So that is probably the most important, I guess, for the actual holiday season. All it is. It's so simple, it's a simple mindset.

Speaker 1:

Shift Everything in life. You can just shift it with your mindset. You just gotta ask yourself a different way. For this example, I want you to ask yourself what is more important to you Short-term satisfaction or long-term financial freedom? True spirit of the holidays isn't about the flashy gifts or the extravagant meals. It's about gratitude, connection, making memories and having fun with friends and family. Are you more aligned with your short-term satisfaction of wanting to buy the latest Apple or Samsung or something which makes you happy for the couple months and then you're over it? Or are you wanting the long-term financial freedom?

Speaker 1:

So actually automating your savings so that when December comes around this year, you're set, you are ready to go, you don't have to stress. You go straight out to the shopping center in Melbourne. You'd be going to Chadston, like I do for myself, and you've got your money, your spending and, worst case scenario, you may need to spend a little bit more of your own money which you have in your bank account not that you've saved up for, but it's not going to be as much as you would have had to the year before or go into debt. Ask yourself that question not going to be as much as you would have had to the year before or go into debt? Ask yourself that question. Imagine starting January with zero holiday debt no credit card bills, no financial hangover, just a fresh start. It'll feel extremely, extremely fresh.

Speaker 1:

By planning ahead, treating Christmas as a year-long expense and automating your savings, that vision can literally become a reality. And if you've never experienced that before, please make sure that next Christmas it comes around. Put that first. Make that your priority. Don't let the holidays dictate your financial future. Take control and enjoy the season for what it truly is. We hope you enjoyed the episode. As always, we know exactly what to do. Hit that follow button, subscribe, whatever platform you listen to this podcast on. Also share it to friends, family, co-workers, whoever you think may benefit from it. But unfortunately, that's the end and we'll see you next week.

People on this episode

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Oscar Don

Co-host
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Zeke Guenthroth

Co-host