The holiday spending season is in full swing – a time when Australians should be using budgeting tools to gain a better insight into their spending and help manage debt. But a large number are missing out on this opportunity.
Canstar’s latest Consumer Pulse Report reveals that a staggering 30 per cent of respondents do not have a budget.
Only 6 per cent of Australians use personal financial management apps such as Raiz, Pocketbook and neobank 86 400, which work to prevent a debt hangover.
Another recent survey by CreditSmart finds 40 per cent of surveyed Australians say they will rely on credit to fund their Christmas spending this year.
Despite this, 4 per cent of CreditSmart’s respondents are still paying off their debts from last Christmas.
Geri Cremin, credit reporting expert at CreditSmart says the easy availability of credit has led consumers to spend more each year than they would normally do, especially during the festive season.
Roy Morgan’s annual Christmas retail sales forecasts are in line with this and are projected to reach over $50 billion.
Michele Levine chief executive officer at Roy Morgan says: “Roy Morgan’s pre-Christmas spending predictions, released in conjunction with the Australian Retailers Association (ARA), show expected spending of nearly $53 billion, up 2.6 per cent on a year ago and well above the latest ABS Inflation level of 1.7 per cent.”
Personal finance management apps help consumers understand their spending patterns and savings well beyond the festive season.
Micro-investing app Raiz has an additional free feature called My Finance. It provides users with personalised insights about their spending habits from syncing to their bank account. In addition it forecasts future free cash based on spending and income to help better savings habits.
Like Raiz, Pocketbook is a free app that is synced to the user’s bank account and categorises transactions and notifies users of recurring bills in order to prevent fees. Users are able to see where exactly where money is being spent to make saving money easier.
Neobank 86 400 allows users to connect and view their existing bank accounts, credit cards and home loans within the app, so they can track savings and spending across all accounts.
The 86 400 app provides customers with actions to take control of their money, such as bill and subscription reminders and then predicts ongoing bills to reduce the risk of unnecessary late fees.
CreditSmart’s Cremin points out that consumers should pay their debts on time to keep credit scores in check over the Christmas period.
Cremin says: “While many Australian consumers are looking to rely on credit to meet their extra expenses, it’s important to know that how you handle your debts over the Christmas period will be reflected in your credit report.”
Buy now pay later (BNPL) is an increasingly popular choice of credit with 20 per cent of CreditSmart’s respondents saying they would use these services this Christmas if they needed credit.
According to the Canstar report, 55 per cent of millennials use a BNPL service. Despite this, two thirds of Australians view credit cards as more financially responsible than BNPL.