With the Christmas lights up in Orchard Road and carols tugging at the heartstrings of mall shoppers, it is easy to get swept away with festive cheer and the year-end celebrations. Gift exchanges, parties and Christmas feasting are all coming up and we are more than willing to indulge ourselves, our colleagues, friends and loved ones. But as OCBC's Mr Vasu Menon notes, some people can get over-zealous with their spending during this time and get carried away splashing the cash.
"While it is important to enjoy the festivities, don't lose sight of your expenses. Set a realistic Christmas budget that you know will not burn a hole in your pocket," adds Mr Menon, the bank's vice-president and senior investment strategist, wealth management Singapore. "Keep a log of what you are spending for Christmas so that you are aware of how much you are spending and stay within your budget."
Financial institutions say credit card spending tends to increase significantly during the last two months of the year compared with the average outlay in other months, especially on retail and eating out. Similar retail spending patterns are expected this year as people look to stretch their holiday dollar through taking advantage of Christmas and post-Christmas sales. OCBC Bank has found that spending during November and December is typically 15 per cent higher than that in other months. In fact, the two months collectively account for 20 per cent of total customer spending over the entire year.
While it is important to enjoy the festivities, don't lose sight of your expenses. Set a realistic Christmas budget that you know will not burn a hole in your pocket
Ms Jacquelyn Tan, UOB's head of personal financial services Singapore, adds that overseas credit and debit card outlays shoot up in November and December as these are peak travel months. The top five destinations based on year-end spending last year were Hong Kong, Japan, Malaysia, Thailand and the United States. "More of our customers are also taking more of their shopping online, with online spending on UOB cards increasing close to 30 per cent in the first 10 months of this year," Ms Tan says. "We are also seeing more customers take advantage of the deals available during Singles' Day, Black Friday and the upcoming 12/12 Shopping Day."
Mr Chew Yung Jin, head of card products at DBS Bank, notes: "Spend in foreign currencies (from travel-related or online purchases from overseas sites) tends to increase at an even higher rate, and the proportion of our customers' spend on foreign currencies goes up as a result."
Here are 10 tips for your holiday spending and travel.
1. Set up a budget
Christmas aside, the end of the year is also the period when many of us take holidays to unwind after a busy 12 months but it can be costly. Mr Menon notes that airfares and hotels are usually more expensive this month because of seasonal demand. He advises travellers to set a realistic budget and ensure that they spend within it. "With the growing importance of e-commerce, do look out for promotions and deals on the Internet to try and save costs," he adds. "Also, if you have credit card points, consider redeeming these where possible as airline miles, which can be used to purchase your air ticket."
2. Track your spend
One way to do this is to download an expense tracker app on your mobile device so you can set a budget and update it each time you make a purchase. "This is a convenient way to track your expenses on the go and ensure you are not overspending," says Mr Menon.
"For OCBC customers, using the OCBC Money Insights tool on OCBC Mobile or Internet banking can help you track your spending automatically, enabling you to view your spending by month, or even by categories like transport or medical services. It even allows you to set budgets and provides SMS alerts so you can track your spending more conveniently."
3. Rewards, promotions and online deals
To stretch your dollar and save costs, look out for promotions and online deals you can capitalise on in this seasonal period. They can be found in newspapers and online. And check with colleagues and friends who may be aware of such deals as well. You can also consider converting your rewards points on credit cards and mobile phone bills to shopping and meal vouchers during Christmas, adds Mr Menon.
Ms Tan suggests that UOB card members shop online and overseas with the bank's Mighty FX service. "With Mighty FX, customers can convert foreign currency at competitive rates and then use that money to pay for the best deals on overseas websites. There are no administrative fees when customers use their Mighty FX debit card to pay for online spending," she adds.
Where possible, you should always try to choose to pay in the local currency. This is because the exchange rate used in such situations are set by the merchant and are usually not favourable.
4. Remain contactable while overseas
Do not swop out your SIM card otherwise you will be uncontactable by your bank if any issues arise with your account or card use, says Mr Chew.
If you are making an overseas purchase (whether while travelling or buying online at a store based overseas), you will sometimes get the option of paying in Singdollars or in the local currency. "Where possible, you should always try to choose to pay in the local currency. This is because the exchange rate used in such situations are set by the merchant and are usually not favourable. Additional fees may be charged by the card networks as well," he says.
5. Use your credit card's EMV chip
Guard against credit card fraud when shopping overseas. Whenever possible, use your card's EMV chip function by inserting the plastic into the payment terminal instead of using the magnetic stripe. Mr Chew says the EMV chip is more secure as it creates "dynamic data" every time a transaction is made, making it nearly impossible for fraudsters to duplicate or clone the card.
"You can enable your card's magnetic stripe if you are travelling to a country that is not fully EMV-compliant but ensure you set the enablement to expire shortly after you return from your trip. This can be done through DBS' Internet or mobile banking channels," he adds.
6. Home-cooked meals
Having Christmas pot-luck meals and parties with friends at home will be kinder to your wallet than going to restaurants. For family gatherings, cooking and dining at home may be more meaningful. Remember, what matters is good company and a good time, which do not always require dining in a restaurant, says Mr Menon.
7. Review your liabilities
Before embarking on any investment, it is important to review your debts, especially now that interest rates are heading up.
SingCapital chief executive Alfred Chia advises that you should prioritise to pay off your credit card debt as it attracts an annual interest rate of around 26 per cent. "It will be difficult to invest and generate that kind of percentage returns. It will be more effective to pay off the credit card debt to avoid incurring high interest costs," he notes.
"It is also important to review your housing loan. However, it is still manageable at an average interest of around 2 per cent per annum." Therefore, there is no immediate hurry to pay off the entire housing loan as you can potentially invest in other instruments to beat that rate.
"If you can do that, it will be smart leveraging. If your existing loan interest is high, consider refinancing to lower the interest. Every penny saved is a penny earned," he adds.
8. It's a festive season for the SRS
All the three local banks are offering Supplementary Retirement Scheme (SRS) promotions this month so there is no better time to reward yourself with a handy way of qualifying for tax relief against income earned this year. You can contribute varying amounts to your SRS account, subject to a yearly contribution cap of $15,300 for Singaporeans and permanent residents and $35,700 for foreigners.
SRS contributions make more sense if you are in a higher income tax bracket. As SRS contributions cannot be refunded, those making them should take note of the overall personal income tax relief cap of $80,000. This applies to the total amount of all tax reliefs claimed, including any on SRS contributions. Mr Menon says it is prudent to evaluate whether you will enjoy a meaningful tax benefit on your SRS before contributing.
Mr Brandon Lam, country head of DBS' financial solutions management group, notes that there is a wide range of financial instruments (including unit trusts, insurance products and other financial products) you can invest SRS funds in to help grow your retirement savings. "Any gains from investments made through SRS funds are non-taxable before withdrawal, which helps you beat inflation," he says.
"The earlier you set aside funds in your SRS accounts, the sooner you can channel these funds towards investment and insurance products that can help you generate non-taxable returns."
9. Give a Christmas present via a CPF top-up
Topping up the CPF Special or Retirement account for a loved one makes a great gift at this time of the year, suggests Mr Chia. You can contribute to the accounts of your parents, parents-in-law, grandparents, grandparents-in-law, spouse or siblings, and enjoy tax relief, subject to terms and conditions. You can also top up your own account and may enjoy some tax relief next year while growing your retirement savings.
10. Review your investment portfolio
It is worthwhile to take stock of your wealth portfolio during this time, and invest excess savings in equities or interest-bearing financial products. Rather than spending all the year-end bonuses received, individuals can consider setting aside an amount to make fresh fund deposits into a time deposit or an endowment plan to earn interest, says Mr Alvin Lee, head of group wealth management and head of community financial services at Maybank Singapore.
Mr Menon says: "Given the volatile markets, those looking to put fresh funds to harder work should tread cautiously and ensure that their investment portfolios are well diversified.
"Also, it may be best to buy gradually over the coming months through a regular investment plan, instead of timing markets, as 2019 could turn out to be a bumpier year than this year."
Source: The Sunday Times © Singapore Press Holdings Limited. Permission required for reproduction