Setting a budget and sticking to it is hard at the best of times, but add the festive season to the mix and things get harder still. Between gifts for loved ones, flights home to families, and the almighty ham, Australians are expected to spend billions of dollars on Christmas this year.
However, a better understanding of how our own psychology interacts with the festive environment can help us to keep our spending in check and head into the New Year without feeling the pinch.
It takes more than willpower
We’ve all been there, we set sensible limits on our Christmas spending, but before we know it we find ourselves in January with a big Christmas bill and a pile of unwanted gifts.
According to behavioural science, that initial motivation and willpower won’t always be enough when it comes to sticking to spending goals as our willpower and attention has its limits, particularly in such a fun and tempting festive environment.
To boost your chances of sticking to these goals it is important to design the right supportive environment and money systems. This might mean:
- Creating small spending speed bumps, like separating our money into separate accounts, setting limits on our cards, or even taking cash on some shopping trips.
- Set up regular feedback on your spending so that you have a constant, immediate and accurate view of how your shopping behaviours are either on or off track.
- Automate good behaviours ahead of time, rather than trying to remember all aspects of your financial goals and constantly avoid festive temptations, like sending part of your pay cheque to a hidden or locked savings account.
Remember the trade-off
When we take on a new expense, we often forget to tell ourselves: ‘by buying this, it means I won’t be able to buy that’. Economists call this Opportunity Cost Neglect, and it means we spend more in the moment, leaving us less for other future expenses.
To manage this, try setting your sights on some financial goals that you would really like to achieve in January or February. This could be anything from a family trip through to easily covering the utility bills. Then before each purchase, take a moment to consider the trade-offs between those goals, and that purchase.
