It may only be early in the season, but it pays to start thinking about your December finances sooner rather than later. No one wants to wake up from the Christmas period with a financial hangover, however, with presents for loved ones to buy, parties and endless social events throughout December, it can be easy to underestimate just how much cash you’ll get through whilst having a holly jolly Christmas.
New research from digital financial coaching app Claro Money has shed light on the lack of financial planning in Britain, revealing that 39% of UK households don’t have a household budget. Furthermore, in the last 12 months, 29% of UK households reported that their income did not cover their outgoings. This, teamed with the inevitable extra spending on festivities in the upcoming months, could land many in financial hot water in the new year.
Fortunately, there are some ways for preparing your finances for Christmas, so you don’t have to restrict yourself from having fun to make conscious money decisions that can benefit you later on. Here are 5 helpful tips.
Look back at last year
A quick look over previous years’ bank statements can help you figure out what you typically spend in the weeks running up to Christmas. Use this as a starting point when working out how much extra cash you will need to save this year. Make a note of what you spent the most money on, whether that’s extra special gifts for the family or specialist tasty treats for your Christmas feasts and break it down into categories so you can work out where your hard-earned November paycheque is most likely to go. As many people may want to make up for last year’s missed Christmas, comparing your outgoings to the past will help you to measure your spending and identify the areas you would most benefit from cutting back costs on.
Start the savings plan early
The sooner you start to prepare, the better position you will be in to make the most of your favourite Christmas Markets and festivities. Decide how much cash you would be able to put aside each week until December, on top of your current outgoings and savings. Be realistic with this amount: if you know you can’t say no to after work Christmas drinks, then make sure you save for this. Whilst this amount can be flexible (emergencies come up for everyone), be prepared to put even a small amount each week into your Christmas savings pot.
Keep the Christmas spending separate
Now you have made a plan and set an amount to start saving every week up until December, be aware that this extra spending pot should be separate from both your day-to-day spending account and your long-term savings. This will help you keep track of exactly how much extra you have to spend, how much you have spent so far, and encourage you to make conscious financial decisions with the money you have for Christmas.
Whilst saving a percentage of your incomings each month is always a good habit to have, Christmas spending will need an extra push to make sure you can have all the fun you’d like over this festive holidays without worrying about the bill come January. Be prepared to have less disposable income in the months leading up to December as you save more – this may seem a sacrifice at the time but is worth safeguarding your finances in the new year and will ensure you have a good time at Christmas.
Cut your losses
It’s been a difficult year (and a half) for most and you may find that your Christmas budget is a little tighter than previous years. This doesn’t mean Christmas 2021 has to be a dry affair.
Take time to consider what you are spending money on. Do you really need seven packs of party food for you and your partner on Boxing Day? Is the gift you’ve bought for your auntie who you only see at weddings and funerals essential or would she be just as happy with a card in the post?
Whilst lots of aspects of Christmas spending will bring us joy, it’s important to consider the wellbeing impact of your spending both in the short-term and long-term. Think about what expenses you would be willing to give up, such as buying gifts for every family member or new outfits for every occasion, and the alternative ways you can enjoy these festivities just as much.
Spread Out the Costs
Whilst you won’t be able to spread out the costs of all your Christmas expenses, consider purchasing what you can early. This will give you more time to shop around for the best deals and save money, whether that’s on Christmas presents to make your loved ones smile or that party outfit at the end of summer sales. Also, supermarkets often allow shoppers to order their Christmas haul as early as November, so you don’t have to worry about this significant cost come December.
Above all, whether you are going to buy special presents or not, remember that the greatest gift you can give someone is your time.