Recovering from the Xmas hangover

What to do if you've dug a hole in your wallet

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published January 7, 2013 3:44 pm AEDT

Like many, I'm suffering from a post-Christmas season bout of having spent far more than I had envisaged. Apart from presents for the family, prawns, Moreton Bay bugs, barbequed snapper and other ocean produce have all managed to sink a big hole in my bank account.

Living in Queensland, it's almost obligatory to invite friends and family over for a seafood barbeque or dinner, and my wallet seems to think I've had far too many visits this season.

Not that I'm complaining – I've had a wonderful time and the money was definitely well spent. Now I have to knuckle down and do some repair work on my finances. Here's my advice for those of you who may have spent more than you would have liked.

If you have a credit card or a store card such as David Jones' (ASX: DJS) Storecard, start thinking about how you are going to pay that off. As they can charge high interest rates, the faster you pay those off, the less interest you'll have to pay and the better off your finances will be. An even better solution is to pay them off totally, cut them up and then get a MasterCard or Visa debit card, which allows you to still use a credit card when it's required, but the money comes out of your savings rather than borrowing from the bank.

If you bought an item using the store's finance facilities, such as Interest Free, RentSmart or Flexirent, offered by retailers such as JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings (ASX: HVN), you should be aiming to pay off the item within the interest-free period. Many of these schemes charge interest rates of over 20% if you fail to pay them off in full before the interest-free period expires.

If you've overspent with cash, the only real solution may be to get a budget in place, cut back spending on luxury items, and actively plan out how you are going to rebuild your savings.

The Foolish bottom line

For those of you looking to benefit from the rise in store financing, you could have a closer look at Flexigroup (ASX: FXL) and Thinksmart (ASX: TSM), both of whom offer financial products to retailers that allow customers to rent or finance their purchases.

As for me, I'll be hunkering down and nursing my wallet back to good health, while attempting to avoid the New Year sales – although those prawns do seem to be a lot cheaper now than before – maybe just one more seafood barbeque.

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Motley Fool writer/analyst Mike King owns shares in JB Hi-Fi and David Jones. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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