Do your finances need to recover after Christmas?

Christmas is still big news. But not in a good way. Recent headlines have reported that many people are in serious debt after Christmas; debt that could take years to repay. The debt advice charity StepChange experienced a surge in enquiries as soon as the festive season was over, with the number of people asking for advice on 3rd January higher than on any day during 2022.

If you overspent at Christmas, how can you get back on track?

In this article we look at three steps to recover financially from Christmas, and three steps to ensure that you don’t get in the same position for Christmas 2023. 

Three steps to recover financially from Christmas

Most of us overspend at Christmas, but there are things that you can do to help get your finances back on track. Our recent article Tips to make your money go further, contains a lot of useful information about how to make the most of every penny. Three of the key steps in doing this are:

  • Create a monthly budget and monitor your spending

Knowing exactly the amount of money you have coming in each month and – even more importantly – where it all goes, is the key to getting on top of your finances. 

Our Tips to make your money go further article explains how to do this effectively.

  • Increase income and reduce expenditure

Every small step you can take either to increase the money you have coming in, reduce the money you are spending – or ideally both – will gradually help to get your finances back on track. Some ideas on how to do this are:

  • 5 ways to increase your income

    • Consider changing jobs. 
    • Take on extra work.
    • Set up a small business as a sideline. 
    • Sell goods online.
    • Rent out a room in your home.
  • 5 ways to reduce your expenditure

    • Cancel any unused memberships or subscriptions.
    • Contact all your suppliers to see if you can get a better deal. If not, switch.
    • Planning meals carefully and batch cook to save money on food.
    • Buy second hand where possible. 
    • Make staying in the new going out.
  • Tackle your debts

Do everything you can to reduce and gradually pay off your debts. Three ways that may help to do this are:

  • If you have any savings, use some of these to repay your debts. Once you are free from debt repayments, you will be able to build your savings again.
  • Choose one debt to pay off first. Perhaps start with the smallest one so that it is achievable. Put as much money into this debt as quickly as you can, including finding creative ways to raise more money to pay it. Then move onto your next smallest debt, and so on.
  • If you have lots of different debts and it’s difficult to keep track of amounts and repayments, it may be an idea to take out an online loan to pay everything off and be left with just one debt to repay

Always remember that if you feel overwhelmed by debt, there is help available. A good place to start is Money Helper – a free and impartial government money advice service. Other debt advisory services include:

Three steps to prepare for Christmas 2023

Even though Christmas 2023 seems a very long time away, there are things that you can do now to start preparing for it, and make sure that you don’t get into a financial mess.

Three steps you can take are:

  • Create a Christmas budget
  • Start to save money for Christmas
  • Plan your Christmas shopping 

Let’s take a look at how to do each of these.

  • Create a Christmas budget

Even if you love Christmas, it is always a bit of a relief to get it all over and done with. And the last thing you want to do is think about next Christmas! But taking a bit of time now to plan ahead can make a huge difference. 

So grab a cup of tea or coffee and make a list of everything you spent money on this Christmas. Remember to include absolutely everything : presents, cards, postage, decorations, food and drink, family visits, parties, meals out etc.

The total cost of all the above may come as a bit of a shock to say the least! But by looking at it now, you can plan ahead.

Remember that next Christmas does not have to be the same as this Christmas. And if there are aspects that you simply can’t afford, then now is the time to make the decision to do things differently. Make those tough decisions now, long before you start getting dragged into other peoples’ plans. 

At the end of this process, you will have a total amount of money that you think you will realistically need for Christmas 2023. The next step is to make sure that you have that money available by Christmas so that you don’t need to get into debt.

  • Start to save money for Christmas

The sooner you start saving money for Christmas 2023, the more chance you have of avoiding debt. Here are three ways that may help you to do this.

  • Regular monthly savings

Divide your budget by ten and aim to put away this amount of money every month between February and November. For example, according to YouGov, the average Briton planned to spend around £642 on Christmas 2022. So, if your 2023 Christmas budget totalled £700, you would need to put aside £70 per month from February to November to be able to pay for this without getting into debt.

It’s even better if you can set up a new bank account to do this and pay the money into it by direct debit every month. Try to treat it like any other regular bill. Look for an account that will pay you a good rate of interest on your savings : you may find one specifically geared towards Christmas such as Yorkshire Building Society who have a Christmas savings account paying 4.5% interest.

  • Increasing daily or weekly savings

Another option is to save regularly but increase the amount as the year progresses. One popular method is the penny jar. Whenever you start is Day 1, and on this day put 1p in the jar. On Day 2 put 2p in, and so it goes on. This is a clever way of saving because at first you don’t notice it at all, but by the end – when you are firmly in the habit – you are saving over £3 per day. 

If you did the penny jar for a whole year, you would save around £600. But even if you just do it from 1st February to 30th November you would save over £460. And it works equally well by transferring money weekly into your savings account rather than putting cash into a jar.

  • Christmas Club

Another savings option that you may have heard of is a Christmas savings club. There are many Christmas Clubs around, which can help you to spread the cost of Christmas over the 12 months. You pay money in each month, and nearer Christmas have funds to help with your Christmas shopping.

Whilst Christmas Clubs can be a disciplined way of putting aside money for Christmas, there are disadvantages. Most Christmas Clubs are not flexible about how you spend the money you have paid. You don’t get your money back at Christmas, but will get either vouchers or a catalogue for your shopping. There is also no interest on your investment, and you usually can’t get your money out of the Club if you need it for an emergency.

So on the whole, it may be better to keep your Christmas savings completely under your control by using one of the other methods we have listed above.

  • Plan your Christmas shopping 

As well as saving money towards Christmas 2023, start planning how you are going to spend it. You may be able to use your money more effectively if you spend it during the year.

For example, if you need a new Christmas tree, or lights or decorations, this time of year could be a good time to get them very cheaply, as shops will just want rid of them towards the end of the post-Christmas sales. The same applies for Christmas cards and gift wrap etc.

It’s also a great idea to start making your Christmas present list now. There will always be one or two things that you want to leave till nearer the time, but most gifts can be bought at any time of year and kept until needed. If you start planning now, you can keep your eye open for sales and special offers throughout the year. If you can get the same gift for less money then it makes complete sense to do that.

You can take your shopping money from your growing Christmas fund to buy gifts throughout the year. But it’s important to keep a careful record of what you are spending so that you don’t overspend your budget, and will still have the money you need in December for last minute gifts, food, drink, and socialising.

And just think how smug you will feel when December comes and you have pretty much finished your Christmas shopping! Things will feel much less stressful, and you can relax and enjoy the festive season instead of rushing around trying to sort out your shopping.

We hope that this article helps you to recover from Christmas 2022 and plan ahead for Christmas 2023. If your finances need an extra boost at any stage, remember that Munzee offers online loans that may be able to help.

Check back here soon for more financial and lifestyle tips from Munzee Loans.