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Christmas can be an overwhelming time for both your sanity and your budget. Devising a budget well in advance is a great way to save yourself the pain and ensure you have a few extra dollars to do other things – such as paying off a chunk of your mortgage.

According to ASIC, Aussies spend up big at Christmas time and usually average a credit card debt of more than $1,600 following the holiday season. However by being frugal in the lead up, and ensuring you stick to a budget, it is possible to start off the New Year in the black. Rather than scrambling around at the last minute trying to pay for everything at once, start preparing now with these tips:

Tips to save and reduce your debt this festive season

  1. 1) Create a Christmas savings account

    If you have one account where all of your expenses and income comes from, it can be hard to keep track of how much money you have to spare for Christmas. A separate savings account just for Christmas expenses will give you a clear idea about how much money you actually have available for spending.

  2. 2) Eliminate non-essential items

    Now more than ever it is important to eliminate smaller, non-essential spending. The morning coffee or the daily lunch can add up to every week and there are cheaper alternatives. Work out how much you could save by eliminating these to put towards your Christmas spending or savings.

  3. 3) Match dollar for dollar

    If you are really determined to take a chunk off your home loan, then try and match every dollar you save for Christmas and put it towards your mortgage. If you're not able to spare that much, try to work out a percentage that you can put away and stick to it.

  4. 4) Use your home loan

    If you have an offset account, now is the time to put it to use. It would be a good idea to put any extra cash that you save for Christmas into your home loan offset account as it will decrease the amount of interest charged at the same time.

  5. 5) Use a Christmas budgeting app

    There are number of apps on your phone that can help you keep track of your money over Christmas such as ASIC’s MoneySmart TrackMySPEND.

  6. 6) DIY gifts

    There are so many websites, particularly Pinterest, which have a great range of DIY gifts that are cost-effective, but still high quality. An example could be buying a candle making kit and create Christmas scented candles for the whole family.

  7. 7) Sell unwanted items

    It's safe to assume that just about everyone will be shopping around for a bargain in the weeks leading up to Christmas. Do you have a number of unwanted or unused items at home? Maybe they are Christmas gifts from last year you never used? If so, why not sell them? Take a look at eBay or hold a garage sale to sell unwanted items. You can use the cash to cover Christmas expenses or put the money towards your home loan.

  8. 8) Use cash

    According to ABS, average households spends $675 each week on food, non-alcoholic drinks, transport, recreation and miscellaneous purchases. You may find it easier to budget if you take out a specific amount of cash and can only use that for the rest of the week. It can be very easy to swipe your card wherever you go and forget how much you are actually spending particularly at Christmas. Having physical money in your wallet could help you stop making impulse buys.

  9. 9) Avoid using credit cards

    So many Australians find it easier to put their Christmas expenses on their credit card, but it can come back to bite you. If you do not repay the amount owing by the end of the month, then you will have to start paying interest. if you continue to only meet the minimum repayment, then you could be repaying the credit card until Christmas next year!

  10. 10) Check frequent flyer points

    Flights often become expensive during the holiday season, so before you spend hundreds of dollars on flights, check any frequent flyer or loyalty points you may have to see if you can use those instead of money.

  11. 11) Create a secret Santa for your family

    This is a great idea to help keep the cost of presents to a manageable level for the adults in your family. It can also make it a bit more fun on Christmas Day.

  12. 12) Create a cash limit

    It can be hard to know how much to spend on someone and it can also be awkward come Christmas Day if some gifts are more extravagant than others. Chat wihth your family and discuss creating a cash limit so that you can remain under budget and no one will feel bad come Christmas Day.

  13. 13) Organise a pot luck party

    If you are hosting Christmas Day, you will most likely be spending hundreds of dollars just on food. However, if everyone brings a plate of food to share, it will help reduce your expenses significantly.

  14. 14) Organise to pay bills before Christmas

    Getting organised and paying your bills that are due around Christmas early means that you will know exactly how much money you have leftover to spend on Christmas shopping and there will be no unexpected surprises in January.

  15. 15) Plan ahead for next Christmas

    It's never too early to start planning for next year. You may want to consider opening a specific savings account and putting away $10 or $20 a week so that by this time next year, you will have a significant amount of money ready to use.

  • Use a calculator to get an estimate of how much you can borrow. Try one here.

  • See if you qualify. To get a more accurate idea of how much you can borrow with State Custodians, click here.

  • Call our Lending Specialists and they can do the calculation for you over the phone plus answer any questions you have at the time. Talk to us on 13 72 62.