Christmas — how to avoid getting into debt in 2018

Believe it or not, Brits splash out a whopping £20bn celebrating Christmas. The average household spends around £727, according to GoCompare. Many households are expected to slap the spending onto a credit card and some families will also dip into their savings to pay for presents, socialising, food, drinks and decorations.

Around 18% of people will pay for at least part of their Christmas on a credit card, with the average time taking to repay it being around 3.2 months. But for others, they may in fact spend the rest of 2018 paying off their festive spending. Around 14% think it will take them over six months to pay off the costs and 6% believe it will take them over a year to clear Christmas debt.

But is Christmas worth getting into debt for? Especially if it means you’ll spend most of 2018 then paying it off? We take a look at ways you can make the most of your money this holiday season and how to avoid starting the New Year with unmanageable debt.

Presents for the children

According to Barclays, 2017 is going to be a record year for overspending on children’s presents, adding to the financial strain of the holiday season. Parents are planning on spending around £128.80 per child. But before you head out to buy the latest gizmo or toy, which they will inevitably get bored go by next Christmas, consider putting some money into a junior ISA for them instead.

If you were to put away £25 a month into a investment junior ISA for a 3 year old this month, it would be worth £5,989 by the time they are age 18 – that’s a return of £1,489, assuming a medium growth rate of 5%*. You can of course save less or more each month, but it is a gift that will pay them in many ways when they are young adult.

Save for yourself

As well as giving your children some money for Christmas, make sure you also save money for yourself. January and February are cold months, so you will need extra cash for energy bills and even for emergencies such as car or boiler breakdowns. If you get paid a little early this month, then do not touch it, because it really does make January financially stressful.

Instead, stick it into a high-interest current account. Make sure you are banking with a bank that suits your needs; some current accounts pay competitive interest rates too. You can read more about top current accounts here.

Don’t over buy

Food and drinks are estimated to cost on average £168 – that’s a big spend for just one day. but the fact is, many of us significantly overbuy. So before you head to the shops and fill your trolley up with unnecessary goodies, carefully plan your shop with a strict list. Don’t forget to check the store cupboard, as there may be things you already have.

Create a budget

Christmas is a fun time, but that doesn’t mean your budget should go out of the window. Whether you’re planning to go out for work parties or splashing out on pre-Christmas sales, stick to a sensible budget to avoid debt.

When buying presents, go out with a list and don’t leave it to the last minute, because panic-buying means you’ll overspend and probably buy the wrong things. If you’re trying to save more this year, then consider cutting down on the presents list; Secret Santa for one can go.

Credit Cards

If you’re are spending on credit cards, then make sure you use the right credit card, such as one that give you cashback. You can also cut costs and save money by shopping online — make use of voucher codes as well cashback sites.

If you already have some credit card debt, see if you can move to a 0% balance deal. This means you can pay off the debt without accumulating interest, but make sure you always repay the minimum otherwise you will face hefty charges and may also lose the 0% balance deal.

Some 0% deals are available for as long as 38 months and can really cut the cost of borrowing by hundreds or thousands of pounds, but ideally, avoid debt altogether and only spend what you realistically can afford.

Enjoy!

Last but not least, have fun!

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*Source Hargreaves Lansdown

Photo by rawpixel.com on Unsplash

Article is accurate at date of writing.