You know what they say, Christmas is the most wonderful time of the year. Unfortunately, it also tends to be the most expensive too! The pressure to buy the perfect gifts, go out with friends, and decorate your home can quickly lead to overspending and serious debt. However, with a bit of forethought and planning, even those on the tightest budgets can enjoy a truly magical festive period.
In this guide we explore why avoiding debt over Christmas is so important and provide MoneyPlus’ top five tips to help you do Christmas on a budget this year.
Why you should avoid Christmas debt
The thought of delivering the perfect Christmas for your family and friends can bring with it a lot of pressure. Naturally, this can also bring the temptation to overspend in order to afford all the gifts and festive bits and bobs to give your loved ones the festive celebration they deserve. However, falling into the trap of accumulating Christmas debt can have serious, long-lasting consequences.
It’s easy to get carried away, putting expenses on a credit card or taking out a personal or payday loan to afford gifts that you can’t really afford. While these things can be done in seconds, often just with the click of a button, it’s easy to forget that these are debts that will eventually have to be repaid – often with high levels of interest.
Indeed, when the Christmas tree comes down and the decorations are put back in the loft, the aftermath of holiday overspending can start to set in. This can lead to stress, anxiety, and a financial burden that may linger well into the new year. Of course, spur of the moment decisions
, made with the best of intentions over the festive period , can also lead to immediate regret that taints the rest of your Christmas.
By avoiding taking on an unmanageable level of Christmas debt, you not only preserve your financial well-being but also ensure that the holiday spirit isn’t overshadowed by monetary worries.
How to do Christmas on a budget: 5 top tips
To help you cut down your spend and stay in control of your Christmas expenses, we’ve provided our top tips below:
- 1. Stick to a budget
Although this sounds obvious, you’d be amazed how easy it is to break your budget in the pursuit of delivering the dream Christmas. No matter whether you’re saving for Christmas, a big birthday, or a wedding, creating a budget should be your first step. By simply determining how much you can realistically afford to spend in total, you can get the balance of your spend right before you even start. This will also help to manage expectations – both yours and that of your family and friends!
Before spending a penny, simply sit down and allocate specific amounts to each category you have to spend on, and stick to your budget religiously. Categories can include individuals you need to purchase gifts for, as well as things like ‘Food and snacks’, ‘Decorations’, and ‘Going out fund’.
It’s also vital that this Christmas spend budget does not compete with any regular household budgets you have. Remember, you will still have all of your regular outgoings in December as you always do. This includes things like rent/mortgage payments, utility bills, and food costs. With this in mind, it could be a good idea to use a budgeting app or online tool to help you keep track of your spending in real-time.
- 2. Start saving early
Although easier said than done, starting to save for Christmas early can really help you afford the Christmas you want and cut on the amount you have to borrow. By simply putting small amounts of money aside each month from as early as January, rather than facing the prospect of a daunting lump sum spend in December, you can resist the temptation to put spending on a credit card or a payday loan.
- 3. Shop with cash
When you think about it, credit cards are somewhat of a double-edge sword at Christmas time. While they do provide flexibility, they also make it far easier to overspend. To resist this temptation, think about shopping for Christmas using cash. Simply withdraw the amount you’ve budgeted for gifts, food, decorations, etc, and leave your cards at home. While many people live almost exclusively cashless-ly nowadays, going old school and using cash for your Christmas shopping can really help you to keep track of your budget and cut down on needless spending.
- 4. Manage expectations
Christmas is about spending time with loved ones and creating memories that last a lifetime. An enjoyable festive period does not have to be measured by the amount you spend on extravagant gifts. With this in mind, it’s important to sit down and have open and honest conversations with family and friends about gift-giving in the months leading up to Christmas. By doing this, you can manage expectations and ensure no one is disappointed or left expecting more.
Often the pressure to overspend and deliver more at Christmas time is unwarranted and simply talking to your loved ones about your situation can dissuade any worries about their expectations.
As children get older and more mature – or if you live in a childless household – it can also be a good idea to change gift-giving traditions. For example, you could suggest a Secret Santa model of gift exchanging, where each family member only buys one gift for one family member, rather than multiple gifts for each individual. This can be just as meaningful without breaking the bank.
- 5. Don’t neglect other financial commitments
Although not strictly a tip to cut Christmas spending, this is an essential point. While it can be tempting to neglect your existing financial commitments in order to fund your dream Christmas, this short-term thinking can land you in a lot of trouble later down the line. Obviously, expenses like rent/mortgage payments, as well as utility bills and council tax payments, must remain a priority during the Christmas period. On top of this, if you’re already dealing with loans or credit card balances, ensure you prioritise these payments before splurging on holiday expenses. If you’re in a Debt Management Plan (DMP) or an Individual Voluntary Arrangement (IVA), it’s also paramount that you continue to stick to your repayment plan. By neglecting your plan and overspending at Christmas, you run the risk of failing your DMP or IVA. If this happens, all the hard work you’ve done up to this point to get yourself out of debt could be wasted.
By allocating a portion of your budget to existing debt repayment, you can make sure you don’t exacerbate your financial situation. This will allow you to start the new year with a responsible and disciplined approach to your finances, rather than regretting short-term overspending.
What to do if you are struggling to pay off Christmas debt
If, despite following the top tips above, you find yourself struggling with Christmas debt into the New Year, try not to panic. There are things you can do and support available to help you through your struggles. Firstly, create a realistic repayment plan aligned with your budget, and explore all of your options. This could include balance transfers or debt consolidation. Next, try to prioritise paying off the debts with the highest interest rates first. Finally, where possible, cut back on any non-essential expenses and set specific monthly goals to steadily reduce your debt.
If you’re still struggling to regain control of your finances after a few months, or if the situation seems to be getting worse, seek professional advice for free by contacting MoneyHelper, or here at MoneyPlus, for example, we can help you find the best debt management solution for your specific set of circumstances.
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