I always get into debt at Christmas – 10 ways to break the cycle
Financial experts share advice on how to avoid getting into festive debt. By Lisa Salmon.
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Your support makes all the difference.Christmas may be a time for fun and frivolity, but it has increasingly become a time for overspending and debt, too.
Despite the cost-of-living crisis, research by IPA has found the average Briton expects to spend almost £600 on core Christmas-related products and activities, including food, gifts, decorations, socialising and travelling, this year.
And although a further study by financial comparison website NerdWallet UK revealed three-quarters (77%) of Brits intend to avoid going into debt to pay for Christmas, 26% of 18-24-year-olds are considering taking on festive debt.
“Though it can be tempting to borrow money now and worry about how you’ll pay it back in the New Year, don’t underestimate the long-term impact of kicking the can down the road,” warns Amy Knight, personal finance expert at NerdWallet UK.
“Repaying debt can make it harder to work towards your financial goals.”
And personal finance expert Jasmine Birtles, founder of the money management website MoneyMagpie, adds: “Every year people get into debt over Christmas. It’s understandable, given the pressure we’re under to spend, spend, spend and the plethora of lovely things in the shops to tempt us.”
She acknowledges it’s particularly tough for parents, as they want children to have lovely presents and festive fun, but warns that filling the house with presents and goodies doesn’t guarantee a happy Christmas.
“In fact, it can lead to dissatisfaction, selfishness and boredom which can create a very unhappy home,” she stresses. “So buck the trend if you can, and stand up for a decent, normal Christmas without the pressure of debt looming over you.”
Here’s how the financial experts say you can break the cycle of festive debt…
1. Set a budget
Knowing exactly how much you have to spend this year is crucial, says consumer champion Vix Leyton, co-host of the Spendology money advice podcast. When you have a figure, list the pulls on it, including socialising, shopping, Christmas dinner, and extra activities for the children. “Really try to consider everything, but be aware something extra might pop up at the end,” she warns.
2. Borrow mindfully
If you’re planning to use a credit card to cover some or all of your Christmas shopping, Knight advises you pay attention to the interest rate. “Being aware of the cost of borrowing can help you rein in unnecessary spending,” she says.
Consider whether you’d benefit from loyalty points or cashback if you use one card over another, but don’t let this tempt you into buying more than you need, she warns, and avoid relying on buy now, pay later schemes which often charge high interest rates if you don’t clear the balance within the agreed time frame.
3. Be open about your situation
As many people are struggling financially, it’s likely that if you tell friends and family you can’t splash out on them this year, they’ll be relieved, says Birtles. “Maybe agree only to buy presents for the children, and to share the cooking on Christmas Day so no-one has to pay for the whole dinner,” she suggests.
4. Stick to your list
To avoid overspending or impulse purchases, decide in advance who you’re buying for and what to get them, advises Knight. “Consider using cash to limit how much you can spend per person, particularly if you’re guilty of making contactless payments without looking.”
5. Do a Secret Santa
Suggest you do Secret Santa with wider family and friends that you’d normally buy individual presents for – there are Secret Santa generator websites like Drawnames that can help ease the process.
“If you love buying gifts, Secret Santa is a great way to focus on this without pressure,” says Leyton. “Set a budget, pick a friend or family member and put all your love and thought into that gift.”
6. Learn to say no
Although Christmas is a time to be be social, don’t accept every offer to go out. “Socialising is one of the biggest, hardest-to-control budget drains in December,” warns Leyton. “The ‘one drink’ after work impulse decision can lead to a very expensive evening.”
When you do go out, mentally set aside what you can afford, and suggest paying for your own drinks, she advises. Similarly, quash costly habits like splitting the bill equally on meals where you’ve not eaten and drunk much. “Politeness and avoiding ‘looking broke’ can lead to reckless decisions and we need to get over this,” she stresses.
7. Get the kids creating
Keep children occupied by getting them to make Christmas cards and decorations, suggests Birtles. “It will give them some fun things to do and will save you a lot on decorating the home,” she says. “Go for walks and pick up cones, leaves, twigs, holly and other attractive foliage to use around the house. You can even spray some of them with silver or gold paint to make it even more Christmassy.”
8. Send online cards
Birtles points out that the price of a stamp is so high now that, together with the cost of Christmas cards, “It’s prohibitively expensive to send greetings in the post, so send online, animated cards instead.” Plenty of free e-cards can be found online.
9. Use points and cash
Try saving £2 coins through the year and use them at Christmas, advises Birtles, who suggests you could also collect points on store cards to buy presents.
10. Put a bit away each month
If you get in debt this year then try to stop it happening again next year by setting up a special savings account for next Christmas, Birtles advises. “Put £5 a month into it – or whatever you can afford – and by next December you’ll have a little pile of cash to use exclusively on Christmas.”