Christmas spending: 3 tips to avoid a financial hangover, according to a financial advisor
26th Nov 2023
It is a given that we all spend more than normal at Christmas, from Black Friday to the New Year sales. In addition to the increased level of personal and gift spending, we also need to cover the usual monthly bills, when winter heating and lighting costs more, and we maybe have more visitors too.
Many of us get paid earlier ahead of Christmas, but this just means the December/January period becomes a five or even a six-week month. So, it is vitally important to plan for Christmas as early as possible and to just keep an eye on Christmas spending.
TV and social media advertising ahead of the festive season encourages us to indulge in a “shop ‘til we drop” style Christmas spending marathon. But, few of us stop to think of the shock and depression of those credit card bills arriving on our doorsteps during dreary January. So, how do we turn Christmas into a financial success rather than a debt-causing disaster?!
Draw up a detailed expenditure plan for Christmas. Don’t sigh; do it now, and you’ll have the template for years to come! This should include not only the cost of presents, but associated costs. For example, the extra food and drinks, increased socialising, babysitting, and more use of fuel, electricity and maybe phones or broadband. As part of the budget, list specific items you’d like to buy for friends and family members, to help you avoid impulse purchases when you go shopping. The resulting final cost of Christmas should then be embedded into your monthly savings plan, so you can spread the cost of Christmas over the whole year. Try to stick to this as much as possible, avoiding the temptation to overspend on expensive credit cards or rely on other forms of debt to finance the costs.
Keep a running total of your Christmas spending — maybe on your mobile phone or tablet. If using credit and store cards, there will, of course, be no avoiding the bills when they arrive in January. But you’ll be better placed to manage them if you know how much you have spent. If you do use your credit card, try your best to pay off the balance in full when the bill arrives in the New Year. Pay in cash, if it helps you stick to the budget. Simply withdraw the budgeted amount put aside for festive spending, in cash, and when it’s gone…. well, it’s simply gone!
Learning to strictly differentiate between a “want” and a “need” is very important, to avoid getting into debt at any stage, particularly Christmas. Never withdraw from long-term savings plans that you may be relying on for the future, such as your children’s third-level education fund, to finance the excesses of Christmas.
The super savvy often use the days and weeks after December 25th to snap up heavily reduced Christmas goods, like decorations, cards and even gifts, and pack them away with the Christmas tree. Kids’ toys and fashion picks may change by next year, but there are standard items you can save a fortune on.
Of course, it is easier said than done, to not spend more than you should at this time of year. But, if you have completely overindulged financially, and you begin to feel things are out of control when all the bills are tallied in the New Year, never be tempted to ignore debts. Credit and store card interest rates are among the highest, so they need to be a priority payment, or else your Christmas gifts can end up costing three times the price tag.
Seek financial advice to help you put a payment plan in place. MABS is a state-run money advice service to guide people through dealing with problem debt. Most people will have time off at Christmas, so why not spend some of it with your partner reviewing your finances, and devising a plan to make changes in the New Year. Check some bank statements to find the areas where you can cut costs, get more affordable services, and address any outstanding gaps in your family’s financial plan. Advance planning, when it comes to money, means peace of mind and fewer shocks. And, it is the thought that counts, so think about smaller locally-bought gifts or something home-made this Christmas; especially now that eco-friendly ‘conscious consumerism’ is in vogue.
Try not to let the financial side of Christmas be a cause of stress that spoils this lovely time of year. And, have a peaceful and healthy festive season.
Carol Brick, QFA, runs CWM Wealth Management, a personal finance company she set up in 2008 that now has offices in Cork and Dublin. She operates a dedicated business, HerMoney, providing financial advice for professional and self-employed women. The business has 10 staff members and Carol has advised over 5,000 clients nationwide.
Illustration by pch.vector. This article was originally published in November 2022.