Are you one of the thousands tempted by short term credit at Christmas?

Christmas for Christians (practising or not) is a time of joy and giving all over the world. If you live on a tight budget, however, it can also be a time of great stress. Everyone likes to join in the festive fun and buy presents for family and friends but if you don’t have any spare cash, what do you do?

Well, the one thing people should avoid like the plague is taking out short term loans just to finance present buying. Similarly, it makes sense to avoid going into a credit card overdraft (unless you’re certain your next pay cheque will cover your minimum payment obligation). While this all may sound like common sense… the pressure of Christmas can make us all do funny things especially when buying for our family (and particularly kids) is involved. A recent festive spending survey revealed that as many as 17% of people surveyed relied on a loan of some sort to cover their holiday expenses!

The importance of borrowing responsibly.

Taking out loans, whether short or long term, should only ever be done in a responsible way and for the right reasons. In other words, you must be sure that you can afford to make the repayments in a timely manner. It’s simply not worth getting yourself into debt that you cannot comfortably handle just to put a smile on other people’s faces, no matter how much you love those faces.

The last thing your family and friends will want to see is you putting yourself into debt; especially because of them. They would rather you didn’t bother with present buying at all or that you give them handmade pressies that cost very little or nothing at all. It is as they say, all about the sentiment of giving and not the cost. Here is an absolutely cracking list of the best DIY present ideas for some inspiration.

Emergencies happen anytime – Christmas included!

Short term loans or credit of any sort should only ever be taken out for a genuine emergency or if you’ve some temporary cash-flow problem that will resolve itself in the near future and making a payment now will save you money in the long run. Emergencies, of course, are no respecters of time. They can happen anytime throughout the year including Christmas time, and there’s no reason you shouldn’t borrow money provided it makes the most sense to do so (i.e. in limited emergency circumstances)

Never leave anything to chance when it comes down to your personal finances. Thinking that you just might get away with something by the skin of your teeth is not good enough; especially when contemplating taking out credit!

The advantages of maintaining a budget during times of festive excess.

So, before you do anything else, find out what a loan will really cost you. Once you know that, you can then go through your budget (if you maintain one that is… and if you don’t we recommend you start today as there’s no better time to do so) to see if the repayment can be met comfortably. If you don’t have a budget, that might be a symptom of why you’re getting into difficulties in the first place. After all, the whole point of budgeting is to forecast all your future outgoings, and a good budget should have a contingency built into it for unseen emergencies. You can download a free excel budget template here to get the ball rolling.

The other thing that budgets are very useful for is to help you  carve a sustainable savings habit into your everyday lifestyle. Having some cash tucked away for that proverbial rainy day is always a good idea and yet so few of us have this contingency in place. A budget will help you to streamline your money supply and make an allowance to set some cash aside on a regular basis. Remember even if it’s a tiny amount start and keep at it, it gives you a platform to build from and as a final tip to help you on a budgeting journey – it’s always easier to assign a small % of your wage to your ‘rainy day’ fund on pay day, don’t wait as it will only get harder to reassign that hard earned cash the further into the month you go!

Kelle Maurer

Kelle Maurer