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So, did you manage not to overspend this Christmas? Unfortunately, overspending is so easy to do. You can end up buying gifts that cost more than you can really afford, preparing enough food to feed a small army, or just getting swept into last-minute panic-buying.
Whatever the reason, you’ve spent more than intended. If it’s any consolation, you are not alone. Research in early 2023 found that 8% of people in the UK ran up debt from Christmas 2022 of up to £600, and 25% relied on credit cards to fund this. Which meant that around 17% of us were still paying off Christmas 2022 debt at Easter 2023.
Wherever things are at now, what’s done is done. But, if your finances are in a mess after Christmas, the most important thing is to move forward and get your finances back on track. So in this article we take a look at:
If you need to get your finances back on track, here is a four-point plan that will help:
If you have run up debt over Christmas, the first priority is to pay off as much of it as you can straightaway. If you have any savings you may want to consider using some of these to pay off your debt in order to get your finances back on track again, making sure you also leave some savings for emergencies.
But many people in the UK do not have savings. In fact, 34% of adults in the UK have less than £1000 savings or no savings at all. So another good method of paying off debts is to “snowball” them. As a small snowball rolls down a hill it gathers more snow and gets bigger and faster. The idea of snowballing a debt is to throw everything you’ve got at it so that in the end it crashes and is gone.
Focus on one debt to snowball first. You may decide to go for the smallest debt to see a fast result, or maybe the one with the highest rate of interest to reduce that one down. Either way, do all that you can to pay as much into that debt as you can. Our ideas below on increasing your income can help you to do this.
And once one debt is gone, transfer everything you were paying into the next debt on your list. Bit by bit, your debts will begin to reduce and you will start to see the light at the end of the tunnel.
The best way to get on top of your finances is to create and stick to a realistic monthly budget. This needs to include all your regular income and expenditure:
This is all the money you have coming into the household, such as salary or wages, tips, bonuses, benefits, plus any help from family or other sources.
Include all regular fixed payments – such as mortgage/rent, loan/card repayments, household bills, subscriptions etc – plus all other spending such as food, toiletries, transport, children, pets, social, leisure etc
Making a budget enables you to get a better understanding of what money is coming in and going out and if there are any obvious problems such as less money coming in than going out. Once you understand the situation there are things that you can do to start sorting it out.
It sounds very obvious, but if you are short of money in your budget – particularly when you are also trying to snowball debts – you need to find ways of increasing your income. Some possible things to try are:
If you do manage to increase your income, it’s a good idea to set up a direct debit straight into one of your debts so that you use some of the extra money to pay that down as soon as possible. Once debts are paid off, you will then have more money to use for other things in your life.
It can be very difficult to find ways to reduce your spending, but there may be possibilities that you have overlooked. Your budget will help you to keep track of what you are spending your money on and how much goes where. But also take the time to:
The key thing is to find as many creative ways as possible to reduce your expenditure. And again, divert any spare money that you get from this straight into your debts to keep chipping away at them and taking more steps towards financial freedom.
The above steps should help you to get your finances back on track. However, if you are trying all the above and your debt is still growing, you may need some external help. A good starting point is to check out Money Helper which is a free and impartial money advice service set up by the government that can direct you to specialist help.
But as well as recovering from Christmas 2023, it’s also important to give a little bit of thought to Christmas 2024 so that you don’t fall into the same trap again. Let’s take a quick look at three things that you can do as from now:
Whilst Christmas is fresh in your mind, make a list of everything you spent. Include gifts, cards, decorations, food and drink, family visits, parties, meals out etc. For Christmas 2024 you either need to have this amount of money available or find ways to reduce your spending.
Once you know how much money you need for Christmas you need to start saving it. A good way to do this is to save something for each of the ten months from February to November. So, for example, if your budget is £750, that’s £75 per month from February to November.
This may seem a lot, but if you don’t save the money regularly it means you will somehow have to find it all at once in December. And you could end up in a financial mess again. So start by opening a new savings account and either set up a direct debit to put money into it regularly or add money such as gifts, tips and bonuses as often as you can.
This is probably the last thing you want to hear right now! But it can make sense to start buying Christmas items and gifts during the year whenever you can get them for a good price.
January is always a good time to buy Christmas cards, wrapping paper, lights or decorations, as stores just want to clear them out of the way. And most Christmas gifts can be bought any time during the year, so keep your eyes open for bargains.
You can use money from your Christmas savings account to buy these items during the year. Just keep a record of what you have spent to make sure that you don’t end up still spending too much, with nothing left in the account by December.
We hope that the above information helps you to recover financially from Christmas 2023, and plan carefully for a wonderful Christmas 2024.
During this time, if you run into any unexpected financial issue that is hard to handle, remember that Loans 2 Go offers emergency loans that may be able to help.
For more helpful lifestyle and financial tips, visit us here again soon at Loans 2 Go.
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