It’s summer, it’s holiday time and it’s the season in which consumers want to take a break from worrying about what they spend. But with just a few shopping days left before Christmas, those who hope to buy a new home next year should actually be keeping an even tighter rein than usual on their finances.
“If you use a credit card in December, you should also plan to pay off the total amount when the bill comes in January, so that you don’t end up paying interest on those Christmas gifts for the rest of the year,” says Everitt.This is according to Berry Everitt, CEO of the Chas Everitt International property group, who says festive season shoppers worldwide are known to spend between 15% and 30% more than they had originally planned on gifts, holiday accommodation and food.
“However, while such extravagance is always great for retailers, it could easily spoil your chances of getting a home loan when the new year rolls around,” says Everitt.
“It is thus important to think about which is really most important to you: feeling rich right now as you spend madly, or being able to buy the home of your dreams next year.”
Because your credit record is so important in obtaining a loan, those who are planning a home purchase early in the new year should also definitely refrain from opening any new store accounts at this time for major purchases like furniture or large appliances, he says.
“In addition, they should be very careful not to spend up to the limit of their credit cards, or be tempted to take a holiday dip into any savings they have already accumulated for a deposit on a home or transfer costs. Cash is always short supply when you buy a new home.”
To help potential home buyers stay on financial course this holiday season, Everitt has the following suggestions:
1. Determine how much you can afford
First make sure you know how much you can really afford to spend on seasonal food, presents and holiday outings. Work out what you will have left after your regular monthly expenses - and don’t ‘cheat’ by including your 13th cheque or year-end bonus.
If you do get a bonus you should try to use as much of it as possible to reduce debts or add to your savings, not use it to get through January.
2. Stick to your gifting budget
If you’re heading for a big family gathering, the adults should perhaps consider only buying gifts for the children, or opting for a ‘secret Santa’ plan where they each only give and receive one gift.Write down who you're buying presents for and how much you plan to spend on each gift - then stick to that list when you go shopping. Do your homework to find out what the recipients really want so you don’t waste money on things that end up at the back of the cupboard, and consider gift vouchers for those you don’t know really well.
If you’re heading for a big family gathering, the adults should perhaps consider only buying gifts for the children, or opting for a ‘secret Santa’ plan where they each only give and receive one gift.
3. Avoid last-minute shopping
Avoid shopping at the last minute, especially for gifts and party food. The stress will lead you to buy whatever's easiest, not most economical. If you’re going away on a self-catering holiday, you should also try to take as many non-perishable food items or frozen meals with you as possible, so you can avoid the high seasonal prices in many holiday destinations.
4. Be an economical host
Don’t be too hospitable if everyone is coming to your house this year for the Christmas or New Year celebrations. Rather be honest about the need to share costs, especially if they will be staying with you, and ask everyone ahead of time for a specific contribution of food, drink or money.
5. Avoid car trouble costs
Avoid additional motoring expenses that can wreck your budget. Service your car or at least have the essentials checked before you set out on holiday and lower the chance of a breakdown and the towing, repair and hotel costs that might follow.
Obey all the rules of the road so you don’t incur any fines and drive carefully to lower your risk of being in an accident.
6. Plan ahead
Lastly, Everitt says you should plan ahead for January. “There are always extra expenses in January for things like school uniforms and equipment, on top of your regular monthly household costs. In addition, many insurance and medical aid premiums go up in January.
“If you use a credit card in December, you should also plan to pay off the total amount when the bill comes in January, so that you don’t end up paying interest on those Christmas gifts for the rest of the year.”
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