In the run up to Christmas most of us spend an extra £1,000 a month – on top of an average of £2,000 existing monthly outgoings. During November and December we all get a bit trigger happy when it comes to spending and a lot of this ends up on credit cards. That’s why January can feel like a rather bleak month. The lights, food, fun, friends and family time have all been replaced by big bills and not much time to pay them off. In 2018 research established that it would take most Brits until April to pay off Christmas debt! This year, with financial instability as a result of Brexit and various rising costs, that time period could be even longer.
A negative festive cycle
Overspending is something that most of us do as Christmas approaches. It feels normal to go a little over the top to make sure that everyone has the food and gifts that will make it a special time. However, all those purchases can seem fairly unnecessary in the cold light of January. As the new year starts, the pressure of other outgoings, from rent and food to travel expenses, will make repaying Christmas debt very difficult. As a result, almost half of us identify January as the most difficult financial month of the year.
Paying for Christmas 2019
Next Christmas might be the very last topic you want to think about right now. However, planning ahead for it could help you to avoid a situation where you’re stuck with a big bill to deal with in January 2020. So, what can you do to pay for Christmas differently?
Don’t spend as much as you did last time. Christmas isn’t really about all the stuff it’s about the people and what you do together. That may sound like a cliché but it’s true. You can still have a fantastic yuletide in 2019 and spend less. While it’s fresh in your mind now, write down all the things you bought this year that you didn’t really need or want in the end, and use it as a reminder not to waste the money next year.
Cut back on other spending in the run up to Christmas. That might mean a cheaper summer holiday or maybe a few weeks without spending on extras in September and October. Being thrifty in the months before the festive season will give you more flexibility during that expensive time.
Start saving now. It’s amazing how small monthly savings can add up over the course of the year. Create a budget for this year now based on what you spent last year. Break that down into 10 monthly payments with the goal of having what you need to pay for next Christmas by October. Top this up with any small windfalls that you get over the course of the year.
If debt is your only option be smart. If you know you’re going to be borrowing to pay for Christmas then make sure you have a plan in place for repaying the debt. Do your research into the types of credit that may be available to you and find the lowest possible interest rate. If you’re eligible for a 0% credit card then you’ll be able to borrow without paying anything, as long as you finally repay within the time limit.
Join a Christmas club. If you know that you’re not that disciplined when it comes to saving, a Christmas club could help to make the festive season more affordable next year. The idea is that you pay for Christmas in small monthly repayments throughout the year and then you get access to your cash – plus bonus – in November.
Plan to buy your gifts in the sales. If you’re really struggling then the cost of brand new Christmas presents might be difficult to justify. So, instead of the expense of full priced items, agree with family and friends to buy your gifts in the post-Christmas sales instead and just be together on Christmas Day. You’ll get more for your money and people might enjoy getting a slightly later gift.
Increase your income. There are lots of ways to add to your income – even an extra £50 a month between now and next October could give you an additional £500 to work with for Christmas. Car boot sales, selling unwanted items online, joining the gig economy and being paid for skills such as photography or writing could all help to generate a little extra cash.
If you are struggling to pay off Christmas this year, you’re not the only one. However, there are steps that you can take to give yourself more chance of a financially freer in January 2020.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read more about Amanda Gillam