Plan ahead for a financially festive Christmas

WITH the festive season rapidly approaching, now is the time to think about how you'll manage the cost of what can be an expensive time of year.

We all want to enjoy a memorable holiday season but a fun Christmas doesn't have to jeopardise your financial wellbeing. Equally, you don't have take a Scrooge-like approach. The best option to keep your money under control this Christmas is to plan ahead.

Start by working out your likely spending over the coming weeks. Include everything you could be up for including gifts, food, transport, decorations - the lot. Then, add it all up to arrive at a total cash outlay.

If your heart skips a beat at the scale of the expense, go back through your list and look for areas to trim the cost. For instance, if you're entertaining family or friends over Christmas, ask your guests to bring along a dish rather than just a bottle of wine.

Once you know how much you're likely to spend, you can buy more sensibly if you spread your purchases over the next weeks. It's likely to be kinder to your bank account than making a mad dash to the shops on Christmas Eve when you're under pressure to buy things in a few hours - with less concern about cost.

There's also still time to use lay-by, and the beauty of this is that it gives you the freedom to pay off purchases, interest free, over a period of weeks (or months). Aiming to make payments with cash rather than a credit card means you won't be lumbered with high interest debt later on.

Reflecting the way the digital world has changed our lives, a recent survey by ING DIRECT found 70 per cent of Australians plan to do at least part of their shopping online this Christmas. The big drawcard for around half of these shoppers is the prospect of saving money but do shop carefully because you could be left out of pocket.

However, the same survey found 37 per cent of people planning to shop online this Christmas had experienced disappointment with internet purchases in the past. That makes it critical to stick with reputable retailers with a proper warranty and refund policy and, as far as I am concerned, a real, bricks and mortar address - where you can follow up if something goes wrong. And do check likely delivery dates - there's not much point spending money on a Christmas gift if it doesn't turn up until January.

The main thing is not to get carried away with the bonhomie of Christmas. Yes, it's a great time of year - but it can be expensive, leaving many people with a financial hangover when all the tinsel's been packed away. Don't put yourself in that position - a bit of planning today can make Christmas fun, and still leave your finances (reasonably) festive.

Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.