In a period marked by high prices and increasing interest rates, it’s crucial to prioritise saving over spending. This economic scenario, while challenging, also presents opportunities to improve financial management.
Economic Overview: Persistent inflation means high costs for many items, but this is also a time when saving money can be particularly beneficial. With the RBA raising interest rates, savings accounts and bonds are offering better returns.
Reevaluating Spending Decisions: Every dollar spent now could be a lost chance to earn from savings. The high interest rates also mean that borrowing costs, especially on credit cards, are considerably higher.
Managing Holiday Spending: As the holiday season approaches, it’s essential to resist the urge to overspend. Planning your finances now, rather than post-holidays, can be more effective. Starting immediately is better than waiting for a new year or another symbolic date.
Holiday Budgeting Tips:
a. Conduct a Spending Audit: Before the holiday season, review your past spending to understand where you can economize.
b. Group Holiday Expenses: Plan all your holiday spending at once – gifts, meals, travel – to prevent under-budgeting.
c. Honest Financial Conversations: Discuss holiday spending with family and friends. Setting gift spending limits or choosing non-material gifts can help manage financial pressures.
Be honest with your family—and yourself
Be open and honest with your friends and family about your thoughts on holiday spending, even if it feels uncomfortable initially. Financial experts suggest discussing and setting limits on gift expenses or considering non-material gifts instead. This open communication is important, as others might also be thinking along the same lines.
For example, Lauren who left her job in healthcare to spend more time with family and start a business has taken this advice to heart. Along with her spouse, she has discussed ways to cut back on holiday expenses. Rather than physical gifts, they are considering giving vouchers for free technology help to their older family members, focusing on offering invaluable, non-material contributions. This approach emphasise the importance of time and energy in gift-giving, rather than the material value of the presents.
In summary, during these times of high expenses and interest rates, prioritising saving and thoughtful spending is essential. By openly discussing holiday budgets and planning a comprehensive approach to spending, it is possible to navigate the holiday season without falling prey to financial pressures, thereby establishing healthier financial habits.