Christmas is an expensive time of year with the cost of presents, food and entertaining, and according to MoneyHelper, a quarter of us are worried about going into debt as a result of the festivities this year.
The financial impact of the pandemic could also mean that people are struggling now, more than ever.
With this in mind, WEALTH at work has created their top ten tips on how to avoid debt this festive season and get a good start to your finances in 2022.
- Plan your budget – Look at your bank statements to work out what you spent last year in the run up to Christmas. You might be surprised at what you find and clearly see areas where you overspent and can cut back. With this in mind, decide what you want to spend this Christmas and stick to it.
- Agree a price limit with friends and family – It is easy to get carried away at Christmas and spend more than you can afford. It is really worth suggesting alternatives to spending on gifts which other members of the family might actually be grateful for. Many families agree limits on the amount to be spent on each other in advance, with some agreeing to only buy gifts for the children, making gifts, or choosing to have a ‘day out’ as a family as an alternative.
- BOGOF – Many shops have some great offers in the lead up to Christmas, such as 3 for 2 and half price deals on toys and gifts. It is possible to save a lot of money by using these offers, however always check that they are genuine savings.
- Shop around for food and drink – The Christmas food and drink shop could be your most expensive supermarket visit of the year, so make sure that you shop around. Some supermarket own brands have rave reviews and are a fraction of the price of the leading brands.
- Look for discounts – If you are buying something expensive, or are buying lots of things from the same place, it can be particularly beneficial to search for discounts. You may even find discount codes for online purchases. It’s worth checking if your workplace offers a discount scheme, as you could get a range of discounts on travel, high street vouchers, gift cards, cinema tickets, days out and leisure activities that you may want to purchase as a gift for someone.
- Check interest free deals – Some companies and credit cards offer 0% interest finance deals, meaning you have a period of time before accruing any interest on the debt. However this debt must still be repaid and although incentives like these can be attractive when buying gifts for Christmas, make sure you have paid off the debt before the deal ends to avoid high rates of interest.
- Beware of pay day loan companies – If you really do need to borrow money this Christmas, it is best to avoid pay day loans as they are a very expensive way to borrow. They are only meant to be short term loans, so don’t touch them unless you are sure you can pay them back on time, as the interest can spiral out of control. If you have already taken a high interest loan like this, speak to Citizens Advice to find out what options are available to you.
- Plan to pay off debt as soon as you can – If you find yourself getting into debt, make sure you pay if off as soon as you can. For example, according to MoneyHelper, if you borrow £2,000 on a 19% APR and only pay the minimum payment every month, it will take you 24 years and two months to repay it and you’ll pay back £4,731 in total. The total interest you would have to repay will be a shocking £2,731! A good option could be to consolidate any debts into a 0% or low interest balance transfer card, as more money will go towards paying the debt off and enable you to clear it over a shorter time period. These transfers typically involve a transfer fee so you would need to consider this before transferring your debt. Whatever method you choose, it’s always best to make paying off your debt a priority.
- Look for ways to save money – It is possible to make significant savings on a range of household bills such as insurance providers and broadband and mobile providers. Price comparison websites make it easy to compare the different deals available. Increases in wholesale energy costs mean fewer deals are available right now, so it may not be a good time to try to change your utility supplier, but there are still significant savings available on other bills and every penny saved can be put aside to help pay for Christmas.
- Plan early for next year – In January there are often some great deals on things you know you are going to need for Christmas 2022. Keep an eye out for special offers and store them away for next year, but make sure you remember you have them!
Jonathan Watts-Lay, Director, WEALTH at work, a leading financial wellbeing and retirement specialists, comments;
“There is absolutely no shame in admitting to your family that money is a bit tight, and you need to watch your spending this Christmas. They may also be struggling, or know that you are, and be relieved. If you are facing money worries, always remember you can contact free services such as MoneyHelper, Citizens Advice or National Debt Line.”