Christmas starts in September: spreading the cost before it lands on credit

Key points

• Between late September and Christmas there are about 13 weeks, or roughly 6 fortnightly pays – enough time to spread the cost of December across your pays instead of finding it all at once.
• A $1,200 Christmas is about $200 a fortnight from late September, or ~$92 a week (illustrative). Left until December, it's $600 out of each of two pays.
• Paying for presents as you go means each purchase is finished when you buy it, however Afterpay, Zip and credit card balances can carry December's spending into January and February, right when the new year's bills arrive.
• If money is tight, essentials and minimum repayments come first – a Christmas transfer of even $20 a fortnight still means part of the season is paid for before it starts.

There are roughly 13 weeks between late September and Christmas Day – about 6 fortnightly pays (depending on how yours fall). Start putting the Christmas money aside now, and the December version of you isn't finding the whole amount at once, out of two December pays.

We're not here to tell you to have a smaller Christmas. The presents, the food, the trip to see family – if that's what you want December to look like, this guide isn't going to argue with any of it. The job here is timing, because when the whole season comes out of two December pays, the gap between what's planned and what's in the account often ends up on a credit card or an Afterpay plan, and the repayments follow you into the new year.

What does Christmas actually cost you?

For most households, more than the presents – and the presents are often the only part that gets a budget. Last December had other lines in it: food and drink for the days people were at yours, travel to wherever the family gathers, hosting, the school-holiday activities that start the week school ends, and the end-of-year events that cluster into the same few weeks. None of that is overspending, it's just what the season involves, and it's why a presents-only budget tends to run out early.

So before any plan, land on your own number. Go back through last December and January's statements and total what actually left the accounts, not what you meant to spend, across all of it: presents, food and drink, travel, hosting, school-holiday activities, end-of-year events. A national average won't help you much here, because your household's version of Christmas is the one you're paying for, and last year's figure predicts it better than anyone's survey. The plan works the same at any size, including when the total comes out higher than you expected.

Spread it from September

Once you've got the number, spreading it is straightforward division. Below is what a $1,200 Christmas takes depending on when you start paying for it (illustrative):

The total doesn't change, however the experience of paying it does. About $92 a week can sit in the weekly budget like any other regular cost, while $600 out of a single pay, twice, has to fit into the same fortnights as everything else on the December list – and when it doesn't, the difference tends to go on credit.

The mechanics take about 10 minutes to set up. Open a separate stash, name it for its job ("Christmas", not "Savings"), and automate the transfer so it leaves on payday, before it can get spent on everything else. If a fortnight gets tight, drop the amount rather than cancelling it – a smaller transfer that keeps going still means less to find in December.

Pro tip: Connect your accounts in WeMoney and the Christmas stash sits beside your everyday accounts – you can watch it grow each payday without logging in somewhere else to check on it.

One boundary worth keeping: the Christmas stash sits beside your emergency buffer rather than inside it. If you've been building an emergency buffer while paying off debt, keep the buffer for the costs you didn't see coming – December isn't one of them, because you've known the date all year.

December is a known bill, not an emergency. Give it its own stash, and the buffer stays for the surprises.

The same idea covers more than Christmas – car rego, insurance renewals and school fees all have known dates and still land as surprises. A fuller system for those irregular costs has its own place to be worked through properly, however December is a good bill to practise on.

Paying as you go vs BNPL and credit cards for presents

When December arrives with the stash full, you pay as you go, and each purchase is finished when you buy it – paid at the register, nothing owing on it in January. The 13 weeks of transfers make that possible, and it's worth comparing against the other two common ways to pay for the same presents.

Afterpay and Zip split a December purchase into instalments that run into January and February, which is exactly when back-to-school costs and the new year's bills arrive. Spreading the cost is what buy now pay later is for, however it means the repayments can outlast the moment that created them. That's how Helen's Afterpay began: presents for a Christmas under pressure, and instalments that kept going long after the presents were opened.

A credit card can go either way. Pay for the presents on a credit card and clear the whole balance inside the interest-free period, and it may cost you nothing extra. However a balance that's still there once the interest-free period ends charges interest at around 20% (illustrative), and it grows through the weeks when money is usually tightest.

Some people will look at all of that and still choose to spread part of Christmas – maybe the one big present, with the stash covering the rest – and that's completely fine. So if you're going to use Afterpay, Zip or a credit card you won't clear straight away, make that decision in September, with January's costs in view, rather than at the register in December when the stash has run short. If January usually arrives with money still owing from December, paying it down while the new year's bills land is its own piece of work – the aim of starting in September is that next January there's less of it, or none.

If September is already tight

A tight September doesn't change the order: essentials first, minimum repayments on every debt second, and the Christmas line after those, at whatever size is honest. Even $20 a fortnight from late September is about $120 by Christmas, which is $120 that doesn't need to come out of a December pay. However if essentials and minimum repayments already take the whole pay, a Christmas plan isn't the first problem to solve – the National Debt Helpline on 1800 007 007 is free, and September is a much better time for that call than January.

Once your accounts are connected, the WeMoney app keeps the plan where you can see it: the stash you've named growing beside your everyday accounts each payday through October and November. You're not spending less on Christmas this way, you're paying for it over 13 weeks instead of two – and you can go into January without still paying for December.

Sources

• Moneysmart: Budget planner
• Moneysmart: Buy now pay later services

This article provides general information only. It does not take your personal circumstances into account and is not financial, credit or legal advice. Consider your own situation and seek advice from a suitably qualified professional if you need it.