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Five ways to avoid the dreaded post-Christmas financial hangover this year

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Five ways to avoid the dreaded post-Christmas financial hangover this year

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3 minute read

The festive period for many of us is the most expensive time of the year.

Christmas is a time when many people like to splurge. With the year the country has faced, it may be more tempting than ever to treat ourselves and our loved ones. An extravagant food shop, a stocking filled with expensive gifts and a season full of social events. (This year, admittedly, there may not be so many social events.)

All through the festive season (and months before), marketing messages encourage us to spoil ourselves and ‘shop until we drop’.

Unfortunately, once the Christmas tree comes down and the new year begins, we can be left in a financial pickle. Around 7.9 million people say they are likely to fall behind with their finances in January after spending too much at Christmas.

No one likes to start their year with a large credit-card bill hanging over them. So, here are some tips to avoid a financial hangover this Christmas.

1. Review your Christmas budget

First, you should always set a Christmas budget. However big your bank balance may be, the temptation to splurge this time of year is high.

It has been estimated that 12.5 million people in the UK suffered financial losses due to Covid-19. If you’re one of them, it may be time to think again about your festive budget.

Work out how much you can afford to spend without impacting your finances, or having to skimp in other areas. Then decide how much of that amount you actually want to spend. Finally, specify a mini-budget for each area of spending: gifts, socializing, food and drink, decorations, etc.

2. Don’t forget to pay back store cards

Using store cards and credit cards is a great way of getting cash back and discounts when shopping. On the other hand, forgetting to pay these back in time can mean you end up paying more than you expected. And the impact on your credit score may not be very festive, either.

3. Plan ahead

It may be too late for this Christmas, but try to plan ahead for next. As financial planners, we always advise clients to consider their financial year in advance. This applies to everything from big holidays, gifts and tax, to special occasions. This way you can allocate a budget and ensure you have enough income to cover it after pension payments, savings and investments.

Last-minute withdrawals from investments and savings can mean that you’re hit with penalties. You can also lose out through badly timed asset sales when the market is low.

4. Don’t do gifts for gifts’ sake

It was revealed that one in eight people in the UK spend £500 to £1,000 on presents alone. Many of these gifts go unused and unappreciated.

According to the UK Gift Card & Vouchers Association, we receive an average of two unwanted gifts each Christmas. This equates to a shocking total of 119,584,080* presents. Around 22,720,975 of these will be sent to landfill. On top of that, around £300 million in unused gift cards goes straight back to the retailers.

We all want to avoid wasting money and contributing to landfill waste where possible. This is why it’s a good idea to identify and agree who you will be exchanging gifts with. Some families, for instance, limit presents to the children of the extended family. Others agree to exchange gifts only if they are seeing each other over the festive period. It’s a good idea to get the rules agreed in advance.

Not being obliged to find everyone’s perfect present will take a lot of stress out of the holiday, too.

5. Shop savvy

There are plenty of deals to be had in the lead-up to Christmas. Avoid being fooled into overspending through these clever marketing techniques. Why not use them to get discounts on things you might have bought in any case?

Before you hit the shops or websites, decide what presents you want to buy. Then search online for the best deal.

The pandemic has favoured online stores, but many small retailers have been badly hit. So, where possible, try to shop or purchase gift cards in local independent shops. It’s good for friends and neighbours if local stores survive, and it also boosts the local economy.

It can be very easy to get caught up in the expensive gifts, swanky parties, and delicious feasts of Christmas. At Capital, however, we believe that what makes Christmas special is coming together to make happy memories, whether virtually or in person.

So, even if the luxuries are stripped back a little this year and we trade a big family Christmas dinner for a virtual Christmas meal, the important thing is we are all together, celebrating family and friendship.

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