Christmas is coming at us fast and this year its going to be a financial dilemma for a lot of people as they battle the urge to splurge with the rising cost of living.

Firstly, there are good reasons to splurge, and one financial commentator recently abandoned herself to it. She said she was giving in to YOLO, the idea that “you only live once” and should live – and spend – in the moment.

There are some good reasons for that approach. This is the first year since the pandemic restrictions hit that Christmas will be COVID free. That means that a lot of families will be able to get together at Christmas for the first time in years. Isn’t that reason enough to celebrate?

The Reserve Bank has been telling us for the last few years that because of COVID that Australian households are awash with cash. We couldn’t spend it during the lockdowns so why not have a big Christmas, spending up big on food, wine and presents?

If that’s how you’re feeling about Christmas, then go for it. But there is another view and its not quite as full of cheer and merriment.

For a start, we seem to be running down those household savings very quickly.

According to the Australian Bureau of Statistics the household savings rate has fallen from 23.6% in June 2020 to 8.7%, a big decline.

Then there is inflation, currently sitting at 7.3% as wages have stagnated, the sharemarket has tanked, and mortgage rates and rents have headed north.

So if you are feeling extra wealthy as Christmas approaches you are probably in a shrinking minority. 

For the rest of us it’s a choice between taking the YOLO approach and spending up big anyway, and perhaps testing that limit on the credit card, or tightening the belt on Santa’s expansive girth and being a little more moderate.

That Aldi Prosecco might be just as good as the French stuff you really like, and do you really need Oysters or Lobster this year when some designer sausages might do just as well at a fraction of the price? 

When you wake up on Boxing Day there’s a risk of two hangovers, one from overindulging at Christmas lunch and dinner and then a potential financial hangover from spending up too big.

And the trouble with the financial hangover is that it can last a lot longer than if you have one glass too many over lunch. 

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