The Christmas Debt Trap

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Christmas is a festive season associated with gift-sharing, majestic Christmas trees and delicious festive treats. However, a recent report has revealed that Christmas is also linked to a rise of expenditure and debt1.

The pressure of finding a perfect gift piles on as Christmas day draws closer. Keen to satisfy gift recipients, this often results in an accumulation of stress and costs. Whether or not the goods are expensive designer items or fairly low-priced Christmas novelties, the costs add up. With sales signs stuck on every shop front window and crowds shuffling through '50% off' clothes racks, debts are easily incurred. Spare a few minutes of your time to look through our recommendations below for ways to counter the Christmas debt trap.

Avoid the Christmas debt trap and the gift-sharing tradition does not need be sacrificed

Higher spending over Christmas

According to a report conducted by business information and insight provider Dun and Bradstreet, twenty four per cent of Australian households anticipated increased household debt levels in the December quarter1. Although expectations for credit applications and extensions in the 2011 December quarter have fallen eleven per cent since the 2009 September quarter projections,1 households still turn to credit cards to cover Christmas-related expenses they could not otherwise afford, even though approximately one out of three people expect to come across difficulty meeting credit commitments.

How to keep Christmas debts manageable

A few simple tricks can help keep your spending under control without being a scrooge. A great way to control your expenditure is by paying for gifts in cash. As you withdraw money from your wallet only to watch your coins and notes disappear gradually, you will gain a better sense of awareness of how much you are actually spending.

Having a budget for your Christmas purchases allows you to estimate how much you can afford to spend on gifts, keep track of your total debt and provide you with a rough estimate of when you'll be able to pay it off.

The Christmas debt trap: Maintaining a budget may help you keeping your spending under control.

Moreover, maintaining a budget stops you from impulse purchases - which can turn out to be a real challenge due to tempting, hard-to-resist special Christmas offers as displayed in beautifully decorated shop front windows. As the competitive retail industry is struggling with their Christmas sales2, you may score great deals by investing some time in comparing retail prices and conducting online searches.

Minimise the risk

When additional expenses from Christmas are combined with debts such as your mortgage and ongoing bills, it can add up to a significant overall debt. This can have a serious impact on the family left behind if a loved one who contributes to the family income passes away. One way to minimise the financial risk is by taking out life insurance to help your family maintain the standard of living to which they are accustomed.

1 Consumer Credit Expectations, October 2011, Dun & Bradstreet,
2 Make or break time for retailers, December 2011, The Age,