AVOID XMAS DEBT REGRET

It’s the time of year people splash the cash but there are ways to rein in your spending, writes Sophie Elsworth

ONE in four Australians are spending more than they earn and will likely add more salt to the wound over the expensive Christmas period.

The pressure on people’s pursestrings is amplified at this time of year, as households try to cope with normal living expenses as well as festive costs, including presents, gatherings with family and friends and going on a holiday.

A new report released by financial services firm Canstar found 26 per cent of Australians feel they are not living within their means, don’t save regularly and cannot curb their debts.

And of those Australians carrying debt outside of a home or investment loan – including expenses such as car and personal loans, credit card and university debt, and buy now, pay later schemes – the average amount owing is $48,809. Women are likely to carry more debt, averaging $50,279, while men are likely to owe $45,611.

Crown Money Management’s chief executive officer, Scott Parry, said carrying debts that attracted “interest rates north of 10 per cent” was dire. He said Australians should switch to a “cash diet ”.

“The amount of interest costs going out is huge and it causes a lot of stress for people who are thinking about this every single day, ”Mr Parry said.

“Everyone using a credit card is spending unconsciously. Their mind set is that they are not at their limit yet and they can afford whatever it is .”

Canstar editor-at-large Effie Zahos said despite record-low interest rates being able to help people “knock off debt ”, other essential costs had risen.

“This includes energy, housing and food–they’ve all gone up, but things we don’ t need, like games, computers, cars have all come down ,” she said.

“Then youth row in sluggish wage growth. Some people have not seen a wage increase for over a decade now and that’ s what’ s pullingus behind.”

Ms Zahos said December and January were “the peak months for consumer spending” and often left people racking up more debt than during the year.

Australia’s household debt is the second-highest in the world, after Switzerland, hovering around 120 per cent of gross domestic product or GDP (the monetary value of goods and services produced within a country in a specific period).

Ms Zahos said Christmas often turned into a trigger to spend but “you can still enjoy Christmas without that hangover”.

Mr Parry said the way of getting back in control financially was by having a set amount of money dedicated to a period of time.

“We don’t feel like we are spending when we are tapping a phone or a ring and not handing overcash,”hesaid.