Simple steps you can take to manage your Christmas debt

Christmas can be an easy time to fall into debt, but there are steps you can take to better manage your debt.

Getting out of debt as soon as possible should be a priority.

WITH many people falling into debt over Christmas, Rosenfeld Kant and Co partner Sonia Gibson said planning was essential.

"It has been said all too often that failing to plan is a plan to fail," Mrs Gibson said.

Part of a medium-sized firm of chartered accountants in Bondi Junction, Mrs Gibson said people incurred debt over Christmas as they failed set budgets they could afford and did not give themselves enough time to find the right gifts - resulting in impulse buying.

Mrs Gibson said it was important not to buy too many gifts for people and to manage expectations of family members regarding the number and type of gifts.

For those inclined to impulse buy or with a tight budget, Mrs Gibson advised using cash.

Cash can be the best method of payment for some people.

"Cash is also best in situations where you are managing multiple store/credit cards for your Christmas shopping and it becomes difficult to track spending," she said.

"If you are purchasing gifts by card it is important that terms and conditions are understood to avoid any unexpected costs or interest charges."

If debt is incurred, Mrs Gibson said it needed to be paid as soon as possible.

"Put together a realistic budget. For example I know if I decide to go on a diet denying myself chocolate for a month that after the first week, if not sooner, I will cave in and polish off a whole block," she said.

"Whereas if I plan to have a small amount more frequently I know that it is a plan that I can stick to - it is about moderation. Sticking to a budget is no different.

"Don't completely cut out the spending on the things that you love. In doing this you risk an impulse splurge that will undo all of your hard work."

She also advised transferring existing credit card balances to a personal loan (or credit card) with a lower interest rate.

Transferring existing credit card balances to a personal loan or credit card with a lower interest rate can help of repayments become overwhelming.

"If your debt repayments become overwhelming talk to your credit providers and tell them that you are having difficulties," she said.

"Credit providers are more likely to accept longer payment terms if you have developed and communicated a plan to repay your debt.

"Seek the advice of a professional with this process if you are uncertain about how to do it yourself. Be proactive in managing debt problems - do not ignore them as this will only make things worse."

Mrs Gibson said the sooner you get out of debt, the better.

"Ideally you want to have the money put aside so that when your December credit card becomes due in January it can be paid off in full to avoid paying interest," she said.

As for getting out of debt quick, Mrs Gibson said for most people, there are generally two ways.

"Earn more and/or spend less money," she said.

"This may be in the form of a second job or by suspending non-essential household services for example cleaning and lawn mowing.

"Pay- TV, mobile and internet plans can also be reviewed for a better deal or maybe there are some plans that can be reduced or cut altogether."

For more details visit roskant.com.au.

Getting out of debt as soon as possible should be a priority.

Sonia Gibson's tips for managing Christmas debt

1. Work out the total amount you can afford to spend on each person and allocate a portion of your budget for each gift.

2. Give yourself enough time so that you are not forced into an impulse buy that costs you more than you planned.

3. Review the number of people for whom you buy gifts, consider talking to family and friends about only buying gifts for the children or having a Secret Santa where each person in the family or group draws a name out of a hat buys one gift for the person they have drawn up to an agreed dollar amount.

4. Aim to pay your December credit card bill in full when it becomes due or as soon as possible to avoid paying unnecessary interest.

5. Be proactive in addressing debt issues if you find yourself in trouble.