How you can hit the New Year with a Clean Financial Slate

By John Burley

Over the past few years I have had the pleasure of sharing my investment techniques for becoming financially free with over 20,000 Australians and New Zealanders. The success stories have been nothing short of incredible. My heartfelt congratulations go to all of you out there putting my book Money Secrets of the Rich to work.

There are three basic ways to put more money in your pocket.
• Earn more, get a pay raise or take on a new higher paying job(s).
• Increase the returns on your investments.
• Reduce your expenses (debt).

Of the three, reducing your expenses (debt) is by far the easiest for most people. In fact, several chapters of Money Secrets of the Rich are devoted to just that topic, showing the average family how they can reduce their expenses by 20 to 40 per cent without affecting their standard of living.

So in this article we are going to focus on controlling (reducing) your expenses (debt). With the coming of the holiday season the timing couldn't be better. I know from personal experience that the financial burden placed upon families to provide everything for everyone for Christmas can lead to one serious financial hangover in the new year.

So let's talk about how to keep holiday spending to a reasonable level and how you can hit the new year with a clean financial slate instead of a flood of bills.

But first a few facts. Did you know the average family adds more consumer debt during the holiday shopping binge than at any other time of the year? The numbers are staggering. Right now, the average Australian family owes over one year's after-tax income in consumer debt. What's more, the average family spends 105% of their annual income. Blowing the budget big time at the holidays causes much of this.

But not this year, because it all ends NOW!
Let me share with you a couple of techniques you can use to have a great Christmas and stay ahead financially.

First of all, keep in mind that your children, friends and family do not need everything in the world under the Christmas tree. Advertisers and marketers have gone to great lengths to convince us that November/December is the season to shop, shop, shop. This simply is not true. It's nothing more than marketing hype.

So when you're out shopping for presents, only buy what you can afford. If you have to buy items on credit you won't be able to pay for when the bill comes, ask yourself one simple question. Would the recipient of this gift really want it if they knew the financial hardship it caused my family? If the answer is no, don't buy it! And if the answer is yes - meaning they don't care about you - then definitely don't buy it. In fact, don't buy them anything!

A couple of practical things my family has done to curb the holiday season shopping madness. First of all, the adults don't all have to buy something for every other adult. If the budget is tight, agree not to get each other gifts. Or put a real money cap on it and don't break it.

With the kids, keep it within reason. And remember your kids would much rather have you, your time and companionship than any gift. So buy them less and give them more time. They will appreciate it a whole lot more.

If you don't have kids to buy for, think about what we used to do in my family before we had kids. Everyone in my family had grown up but none of us had started families yet. We decided not to exchange presents, but rather, everybody would kick in some money then divvy it up and all go shopping on December 26th. It was great! No wasted time hassling in the stores trying to find something for someone who didn't need anything, then just buying something, anything, so you'd have something to give them. No gag gifts, no yellow sweaters to return or never wear, no ugly ties, nothing that didn't fit and nothing you didn't really want. You got exactly what you wanted for half the price!

We still did a tree, decorated the house, and had the Christmas dinner. We just didn't waste hundreds or thousands of dollars on gifts that no-one really wanted once they got them. Sure, we still gave a few gifts, but they were really thought out and not just the "I spent $100 on Bill, so I have to spend $100 on Pete" thing. So, for several years we all got together and went after-Christmas shopping. We saved lots of money and spent quality time together. I highly recommend this Burley (pre-children) Family Tradition.

Another awesome way to save is to make gifts. I know I've always appreciated gifts made by people with me in mind much more than store-bought gifts. Now I can't wait to get the presents my kids make me at school and the craft store.

If you are not particularly crafty, then give away personal services. I remember one year my wife gave me a little notebook. In it were vouchers that could be redeemed on demand (within reason). Things like one backrub, one romantic dinner… you get the idea. It was great, we spent more time together and it was better than any gift she bought me. Hey, I'm going to have to remind her to give me one of those books again this year!

Or make a commitment to do something. Like, take your son to golf once a week for a month. Or go on a family vacation (one that fits the budget). Get creative - there are lots of things you can give/do for the people who are important in your life that don't cost a small fortune.

So there you have it. Control the shopping madness this year. Give gifts of a more personal nature and avoid the Holiday Credit Card Hangover.