Survive Christmas without going into debt

If you want to avoid the Christmas credit hangover, you've got two months to save up for your expenses. If you can put aside $50 per week, your 2012 holiday budget is $400.

Some people will find that a pretty easy target to blow through – particularly if you have a big family.

Research from Liberty Financial shows that in recent years around 70 percent of Australians used a credit card to fund the costly Christmas period. But almost a third struggled to pay it back in the months that followed.

Worse still, 7 percent indicated that they had still not paid off their Christmas cheer up to 12 months later. Talk about a gift that keeps on giving (to credit card companies)!

"I'm yet to meet anyone who diligently puts away a set amount of money every week to save for the festive season, but I have encountered many people who have racked up huge amounts on credit cards and personal debt throughout the Christmas period and been unable to pay their debts come January," financial planner Scott Pape writes in his blog for Barefoot Investor.

This year, it seems Aussies have wised up to the Christmas credit card trap and more of us plan to tighten the belt this festive season.

A separate Newspoll conducted for Dun & Bradstreet has revealed that 37 percent of us are less likely to pay for Christmas expenses using a credit card this year.

With just seven short weeks until Christmas, now is the time to start planning to ensure that your new year's resolution isn't to avoid bankruptcy, according to Pape.

"For sanity I suggest this year you beat the Chrissie crowds and get your shopping done early. Bonus points if you go old school and employ the time-tested failsafe method of lay-buying your presents," he writes.

Pape recommends following the words of the great man himself: make a list, check it twice, and find out who's been naughty and nice.

"Your list should have all the people you plan to buy presents for and the amount you plan to spend. To ensure you don't suffer a debt-induced hangover in the new year it's important to fund your festivities with cash. Over the next two months start diverting a set amount each pay day to a separate account."

For those who choose to use a credit card over the festive season, RateCity spokeswoman Michelle Hutchison offers these tips.

"It's okay to use a credit card if you need to over the holiday season so long as you use it wisely and avoid overspending," she said.

"Set a budget and don't exceed it. Then before you receive your Christmas bill in January compare balance transfer deals and transfer any outstanding debt to pay it off with a low interest rate."

A balance transfer card will only benefit a cardholder who avoids using it to make new purchases and those who have a plan to repay the debt within the low-interest period, she said.      

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