Fast forward to January 2016. After the sparkle of Christmas is over, are you left feeling dull because of the credit card bills flying in the New Year? It can be hard to avoid using credit to pay for the festive season but saving in the run up will help soften the blow in January.
Saving versus borrowing for Christmas
It’s difficult to pay for Christmas out of December’s pay packet alone, so start to save up as much as you can beforehand. Start today and set up a jar or direct debit to a high interest savings account. Even a small amount over a few months can make a big difference.
Borrowing money to cover your Christmas spend will come at a price #ouch #ccinterest and fees. Your money can be used for something far more worthwhile – at worst, it could leave you with debt you may struggle to pay off.
Christmas savings clubs won’t offer you interest on your savings and come with a greater risk than saving through your bank or building society.
Step 1 – Write down what you want to spend
The average Christmas spend per household is around £500, which includes food, presents, travel and decorations, among other expenses.
To begin your budget, make a list of family and friends you will be buying presents for and allocate an amount for each person.
If you are cooking Christmas dinner then consider how many people will be coming over and how much you will need to spend on food and drink. Ask guests to bring a bottle of decent white, red or sparkling wine or a few bottles of beer. Or if you have a friend who loves to cook they could make a special pudding or trifle.
From there, you should be able to work out how much money you would need to put away each month.
For example, saving £50 a month from the start of the year will get you £600 to spend at Christmas. Start September with £100 a month gets £300 by November.
Step 2 – See how much you need to set aside every week or month
Treat saving in the same way as you would a bill. Put away money now. If you can’t think of ways you can save money. Drop the lunchtime takeaway at Subway/Maccies/KFC or Costa/Starbucks. Take a nutritious home-made packed lunch instead. Get the family involved if they are older or your mates to join you. Pool the best ideas. My favourite Christmas saver is from my friend Kay. She gave me this present: “We decided to tell the kids that Father Christmas brought one very special present. The rest were from us.” She added: “This took away the stress if we didn’t have much money to spend on presents.”
Tom told me his family agreed a sum to spend on each child in the extended family. “It was getting ridiculous. I was one of five siblings and my wife is too. The nieces and nephews list was 20!” So the plan was “we had a budget of a fiver and we could even spend less by sharing a Santa cheque……..This is a promise note to make their favourite cake or taxi to the cinema or shopping expedition.”
Think about and commit to saving a regular sum each month or week is more effective than simply saying you’ll save whatever you have left over, which may be nothing.
Try to be realistic – it’s better to commit to a manageable amount than to aim too high and give up.
Not sure how much you can afford to save? Start small – put your spare £1 or £2 coins into a jar each week. If that works, try setting aside a bit more on a regular basis.
Step 3 – Consider starting some new Christmas traditions
Pressure to please loved ones and to give children the perfect Christmas tops the list of reasons people overspend during the festive season.
Consider starting some new Christmas traditions that the whole family can join in with and save some money along the way.
Firstly, start early. Picking up Christmas essentials like crackers or decorations in the sales can mean big savings, sometimes around 50%. If you know what gifts you need to buy, it can help to pick up an item a month to help spread the cost and save you the hassle of shopping when everyone else is.
You could also embrace the digital age and email Christmas cards to save on postage. There are lots of free websites that let you create your own cards, with family photos and videos. First class stamps cost 60p, while second class stamps cost 50p, so if you plan to send 30 cards by email this year, you could save between £15 and £18.
A pre-Christmas clear out with the family will help you get in order for the festive season but could also put some money back in your pocket. Once you’ve put aside anything you no longer want, make some extra cash by selling it online or at a local sale. If you time it right, you’ll find plenty of people looking for second-hand gifts. Check out our guide How to get rid of clutter and make money.
Websites for more advice: https://www.moneyadviceservice.org.uk/en
If you’re buying gifts for work colleagues, you could set a limit of £5 to £10. You could also give something handmade instead, especially if you’ve got a hidden talent – with everyone feeling the pinch, your suggestion may be very welcome.
Step 4 – Decide where to put your Christmas savings
For small amounts the best place might simply be a coin jar. Make sure you transfer it into a savings account as soon as it’s built up to a tidy sum.
Maybe you already have a bank account that lets you set up a separate pot for your Christmas savings goal. If not, open an instant-access savings account.
Set up a Direct Debit or standing order to transfer the amount you’re saving into your Christmas account each month.
Comparison websites are a good starting point for anyone trying to find a current account tailored to their needs.
I recommend the following websites for comparing current accounts:
Go Compare – This also allows you to use the government-backed Midata tool to securely upload your past transactions for customised current account recommendations.
Money Saving Expert
Comparison websites won’t all give you the same results, so make sure you use more than one site before making a decision.
It is also important to do some research into the type of product and features you need before making a purchase or changing supplier.
Find out more in our guide to comparison sites.
Alternatively, you could look at using a Christmas savings scheme, but they’re not regulated in the way that banks and building societies are.
If the Christmas club you’re saving with goes out of business, you may lose all of the money you put into it. You’re also quite likely to receive your money back in vouchers, which are not always easy to spend in full and gives you a limited range of retailers to spend it with.
If you are struggling to open up a bank account for your savings, then consider speaking to your local credit union. They’re more likely to offer you a higher rate of return on your savings than a Christmas club.
Blessings this Christmas