Overspending at Christmas can hurt your finances deep into the new year. More than one in 10 people took six months or longer to pay off Christmas credit from last year – and one in 20 is still paying it off now, according to debt charity StepChange.
What’s more, while inflation has slowed, many households will find their money doesn’t go as far as it did just a few years earlier. For example, the Office for National Statistics has reported that food prices were 30% higher in October 2023 than in October 2021.
Many of us will likely be feeling the pinch this Christmas, so we asked three financial experts for their top tips for surviving the festive period. And they all agreed on one essential piece of guidance.
Communication is the key Christmas money-saving tip
The biggest gift you could give yourself this year is being open about what you can and can’t afford with family and friends.
Sam Moran, a debt adviser at StepChange, told us: “Everyone has an understanding, especially at the moment, [of] how hard it is with the cost of living crisis. So I wouldn’t be scared of having those conversations.”
Emma Gosling, a financial coach at Octopus Money, agrees, and adds that “there’s enough stress around Christmas as it is, so having those conversations early is a good thing to do”.
Emma encourages her clients to reflect on their expectations for Christmas and to open up conversations – including about what they don’t want to do – sooner rather than later.
But why can it feel tough to talk about finances in general, let alone at Christmas?
“We’ve come from a culture where we don’t like talking about money; it’s a bit of a taboo. But if we can encourage people to have those conversations, most of the time they will find out that other people are feeling similar things,” Emma explains.
And StepChange’s Sam Moran believes that having these conversations isn’t necessarily something that you have to force yourself to do.
“You know, your family by and large do love each other… having those conversations does make people feel better.”
Sam believes in being bold and opening up the conversation first if necessary. “I haven’t yet had anyone turn around and say, it’s a bit tight, you know,” he adds.
But it can be more difficult to talk to kids, so budgeting is vital
Making Christmas magical for your children, while managing their expectations, might be more difficult than with adult friends and family.
Sam explains: “One of the biggest things that we’ll hear from clients around this time of year are parents concerned that they can’t give the kids the Disney Christmas, the big gifts, the PS5, the Switch, whatever the other kids at school are getting.” And he believes “it plays a massive part in the overspending”.
The best advice he has for parents is to budget, even just for December, so you have an idea of what’s available. Your budget can then inform what gifts you buy, rather than realising you’ve overspent after buying them. Having a budget could also make it easier to have an honest conversation with your children about the gifts they can expect this year.
Emma has been having conversations with her clients about spending on children, too. She stresses that younger children especially won’t know what things cost, and there is no set amount that people need to spend on kids.
“I’ve been saying, connection, silliness, being together, that’s what’s going to make memories for your family, so spend time instead of money.”
Managing your finances alongside social obligations
A recent NerdWallet survey found fewer than one in four are planning on going to their office Christmas party, with several respondents saying it’s too expensive to attend.
Obligations such as parties and other festive events can take a toll on your finances.
We spoke to Laura Turner, who runs personal finance website Thrifty Londoner, about navigating social spending at Christmas. In an email to NerdWallet, she echoed Sam and Emma, suggesting that communication is key – especially if you’re thinking about skipping an event or suggesting an alternative activity.
“Remember that your friends and colleagues are likely to be in a similar position this festive season, and would probably appreciate the opportunity to save some money where possible,” she said.
Laura also highlighted the importance of budgeting. “How much money are you happy to spend on all of your social events in December?” she asked. “You could transfer this exact amount of money over to a separate bank account… to avoid overspending. Once that amount of money is gone, it’s gone.”
So how can you budget at Christmas – and beyond?
While budgeting can help over Christmas, it’s also the best long-term strategy for anyone wanting to take control of their finances, and the experts we spoke to agree.
Sam explains that when you write it down, you might say: “OK, now I realise all the things I was forgetting about, all the things I was missing, and it gives you a real picture of what’s going on”.
Budgeting can also help you get a grip on your finances in January. Emma says you can start afresh by writing down your income and outgoings. Then tackle your fixed costs by “cutting out some subscriptions, changing broadband provider, maybe [your] car insurance is coming up for renewal, finding a cheaper one”.
Then you can look at ways to cut down on the costs that change month to month: “It could be changing supermarket [or] it could be going out or having a takeaway once a week instead of twice a week.”
It’s not about being restrictive or punishing yourself. Instead, it’s about focusing on broader financial goals and aligning your spending with what’s important to you, says Emma.
One of those goals could even be saving for Christmas 2024. Both Sam and Emma told us that budgeting for the festive period should be something to do longer-term, throughout the year.
And another thing to do early, rather than on the day? Book your travel. Sam explains that while presents may seem to be a priority, trains especially can get very expensive if you don’t book in advance.
Expert tips to avoid overspending at Christmas
- Use technology. Many banking apps allow you to create separate pots for your savings, which can make it easier to put money aside and budget.
- It’s only a deal if you were going to buy it anyway. When asked about Black Friday, Sam says: “It just doesn’t end. And it’s everywhere and it’s every company.” During the winter sales, it’s best to avoid the advertising, buying only the items that you need or want anyway. Writing a list before the sales start could help you stick to buying only what you need.
- Go for group gifts, pooling your money. Sam and his brother, along with their partners, are pooling money to buy a group gift for his parents. If you’re having a big Christmas get-together, joining together like this can ease the pressure of feeling like you need to buy a gift for everyone.
- Get creative. ‘New’ traditions can replace older, more expensive ones – there is not always a need to have a turkey dinner, for example. When it comes to gifts, Sam says that he treasures the drawings a friend does for him each Christmas more than any video games he might get.
- Start early. Finally, Emma says that she started thinking about what to buy at Christmas in June: “I just make notes of things that I’ve heard people say that they want. And I will just write a list and work out how much I want to spend, and then write down the price of each thing as well.” While not all of us will be this organised, it could be a strategy to try next year.
Image source: Getty Images
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