‘Tis the season for wise spending decisions

As the festive season approaches, the allure of holiday spending looms large. From gifts to travel, Australians are expected to spend significantly, with an average of $1,680 anticipated for Christmas 2024—a figure reflecting rising costs compared to recent years. While the joy of giving remains at the heart of the season, managing holiday expenses wisely is essential to avoid a post-Christmas budget hangover.

A Shift in Spending Habits

The way Australians manage holiday spending has evolved. A recent Finder report highlights that nearly a third of Australians (29%) plan to use credit cards or Buy Now, Pay Later (BNPL) services to finance their festivities​. This trend demonstrates the growing reliance on short-term credit solutions for managing rising costs during the holidays.

Buy Now, Pay Later: Convenience at a Cost

BNPL services like Afterpay and Zip continue to gain traction, particularly among millennials and Gen Z. However, other generations, including Baby Boomers, are increasingly using these services for their “interest-free” appeal. Yet, it’s important to look beyond the “no interest” promise. BNPL platforms often include fees such as:

• Late payment fees, which can quickly escalate if payments are missed.
• Monthly account-keeping fees, which accumulate over time.
• Processing fees for additional payments.

While BNPL can be a useful tool when managed carefully, falling behind on payments can lead to financial hardship. Research from ASIC revealed that 21% of BNPL users have experienced financial strain, with some even sacrificing essentials to meet repayments.

Despite the rise of BNPL, credit cards remain a popular option for many Australians. However, the costs associated with credit cards—such as high interest rates—have prompted banks to innovate. New interest-free credit cards offer an alternative, eliminating interest charges but including minimum monthly payments and flat monthly fees.

These options can provide flexibility during the festive season, but as with BNPL, discipline is key. Avoid overextending yourself and always have a plan to manage repayments to prevent a financial burden in the new year.

Tips for a Financially Savvy Festive Season

1. Set a Budget: Determine how much you can afford to spend on gifts, travel, and other holiday activities, and stick to it.
2. Plan Ahead: Shop early to take advantage of sales and avoid last-minute purchases that may exceed your budget.
3. Limit Credit Use: Use credit or BNPL services strategically and ensure you can meet repayment obligations.
4. Focus on What Matters: Remember that meaningful connections and thoughtful gestures often hold more value than expensive gifts.

The Gift of Financial Responsibility

The festive season doesn’t have to come with financial regret. By making informed spending decisions and balancing indulgence with responsibility, you can enjoy the holidays without compromising your financial well-being.

At JBS Financial, we encourage Australians to approach their finances with the same care they give to holiday planning. After all, the best gift you can give yourself and your loved ones is a secure financial future.

Let’s make this season one of joy, generosity, and wise spending decisions. For tailored financial advice to keep you on track this festive season and beyond, reach out to the team at JBS Financial.

References:

1. Finder: Australia’s Christmas Spending Statistics
2. ASIC BNPL Industry Data