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Bruce Brammall, The Australian, 24 December, 2023
The last week before Christmas can be a tough one to get through – mentally and physically draining.
It seemed like everyone I spoke to was falling over the line, just trying to get through to today, Christmas Eve.
Sure, some jobs can be fairly cruisey heading into Christmas, but it seems most people aren’t that lucky.
Working extra hard to get tasks done before clocking off for the year, added to the stresses of planning and shopping and the more-than-usual social catch ups, which often add to physical stresses.
Congrats, you made it. Time to chill.
From a financial perspective, there isn’t much you can do at this point that will have an impact on ending the year on a financial high.
The money has largely been spent. The financial decisions have been made. Whatever mistakes have occurred during the year … now’s not the time to stress about them.
Don’t overthink those things at this time of year. Enjoy the next few days. Eat too much. Have that afternoon snooze. Watch some sport. Enjoy the time with family and friends.
It’s been a long year. And, figurately speaking, it’s reached the time of year known as “beer’o’clock”.
Tough year
There seems to have been little respite this year (save for the last couple of months of strong market returns).
For most of this year, homeowners, investors … hell, everyone … were battling fires on so many fronts.
Interest rates started this year where they left off last year – on a bull run. We got four in the first half, then a reprieve, before then getting another one as we were waiting to watch the Melbourne Cup.
Anyone with a reasonable-sized mortgage was feeling pain. Budgets had to be trimmed to make sure the roof stayed over our collective heads.
That pain was also being felt by renters. Low vacancy rates, added to interest rate pressures, saw rents pushed strongly higher across much of the country.
Then add in cost-of-living. The cost of everything seemed to increase every time you walked into a store, particularly supermarkets.
Could be worse
Speaking of cost of living …
I’ve been fortunate enough to do a bit of travel. Outside of Australia, Argentina has been my favourite country. Mrs DebtMan and I went, on our honeymoon, in early 2003.
They’d just been through an economic crisis, devaluing their currency against the US dollar and causing havoc for investment markets by defaulting on their government bonds.
But if things were bad back then, they’re a whole lot worse 20 years later.
At the time, the Australian dollar would buy roughly two Argentinian pesos.
Two weeks ago in mid-December, one Aussie dollar was buying about 240 Argentinian pesos. On December 14, the peso got devalued again. Australians would now get 545 pesos for just one Aussie dollar.
Argentina has annual inflation running at 170 per cent and official interest rates of about 135 per cent.
The following home loan comparison isn’t really fair … but I’m going to do it anyway.
Today, if you had a $500,000 mortgage in Australia, paying 6 per cent, your monthly mortgage repayment would be about $2997.
On the same amount in Argentina, your monthly interest bill alone would be $56,250. Add another $500 or so of principal. Yep, about $57,000 a month in mortgage repayments.
As I said, not a fair comparison. Unlike Australians, Argentinians don’t borrow until their noses bleed. Their debt to gross domestic product (GDP) is around 4 per cent. Ours is 116 per cent.
For every $1000 we borrow, their equivalent borrowings are roughly $34 … and 50 cents. Interest on $34.50 ain’t much. (Though, if you convert it back into local currency, you get 18,793 pesos, which sounds like a lot of debt.)
Therefore, most Argentinians don’t have any debt. When their central bank raises interest rates … most Argentinians would either laugh, or fail to even notice.
Back to Oz
Australians have made changes to Christmas this year. About 60 per cent are spending less because of the rising cost of living and tighter budgets caused by higher mortgage repayments.
And they are adjusting how they spend their money. Cheaper brands than usual, shopping using rewards points, planning ahead to buy things at bigger discounts, such as the Black Friday sales.
Fewer, and cheaper, presents are being bought. Holidays are being adjusted, with less international travel and more choosing to save a bit and travel within Australia.
Christmas changes every year. Some of the traditions change a bit, or get adjusted over time. But they also change as you age.
From Santa being the focus, to kids getting older and spending more time with their mates, to “going home for Christmas” in your 20s, to becoming a parent yourself, to being an adult and hosting extended family Christmases.
For older Australians, Christmas becomes more about a time for catching up with the kids and potentially spoiling the grandkids a bit.
It’s also a time of reflection. At some stage over the next few weeks, almost everyone will spend a lot of time catching up with friends and relatives, asking them about their year, and talking about your own.
That will lead, at some point, to thinking about what changes you’d like to make next year to improve on this year.
Planning ahead
For those within reach of retirement, or those who recently arrived, the focus is on making sure that you’re prepared for retirement as best you can and that you’re making the most of easy opportunities.
Making sure that when you get there, you can enjoy times like Christmas, without having to stress on every last dollar being spent.
The work for that is, obviously, best done over a lifetime. But that last five years before retirement is a time when you can have a serious impact on the quality of your retirement.
There’s plenty of time to save a wad on tax with super contributions, make adjustments to your super fund, pay down debt and increase your retirement income.
There’s a conscious mindset you need to adopt though. If you’re going to do it all yourself, and you’ve not put much thought into it until this point, there’s a lot of reading you’ll need to do about super’s rules and how to make the most of them.
Or you make a decision that your time is more valuable than that, or you’ve got things you’d rather be concentrating on, and you seek advice and pay for someone’s expert assistance.
But not taking advantage of them could cost you tens of thousands of dollars before retirement, which could equate to thousands of dollars a year in retirement income.
Looked at another way, what you can do in your last 5-10 years before retirement could help you to make enough to pay for Christmas every year.
Set and forget?
There’s no such thing as set and forget in the preparation for a great retirement. Or at least, there shouldn’t be.
You might, or might not, not need to adjust your investments, super or non-super, as you head into retirement, but you should certainly be putting in consideration a lot of other elements that will have an impact.
Figuring out how much money you’re going to need to fund your retirement, including hopefully being able to splurge a bit at Christmas, becomes critically important.
That comes down to working out a budget of what you’re going to need to get through. Accurately taking into account all of the household expenses that you’ll need to take care of.
And always adding a bit for the extras that you’ve forgotten, or replacing big ticket items that do, occasionally, break. And for when we have years like the last few, when inflation gets a bit out of control and pushes up costs, permanently.
At some point in the next few weeks, if that’s you, open a spreadsheet and start listing them, monthly, or annually. Look through some bank and credit card statements.
Back to now
Just planting a seed. Planning for the quality of your future Christmases is not a job for today.
For most, today is largely about making sure you’re ready for tomorrow. Getting those last-minute jobs done. Making sure you know what needs to be done tomorrow morning to make the rest of the day go without a hitch.
And, hopefully, later today, being able to sit back with a cool drink and smile about how much you’re going to enjoy tomorrow.
Merry Christmas to you all.
Bruce Brammall is both a financial adviser and mortgage broker and author of books including Debt Man Walking. E: bruce@brucebrammallfinancial.com.au.