Advice for UK shoppers splashing out this Christmas

With many people preparing to enjoy Christmas on credit Vicky Shaw looks at the festive financial risks and how you can best avoid them

Think about your finances this Christmas
Think about your finances this Christmas

This Christmas, UK shoppers expect to splash out a staggering total of £24 billion on festive food, treats and gifts.

While you may say this should be interpreted as generosity, the findings, from Government-backed body the Money Advice Service (MAS), also paint a worrying picture of how many of us are over-stretching our purses and wallets to pay for, often unnecessary, festive luxuries.

Two-fifths (40%) of the 2,000 people surveyed said they were under pressure to put on a special Christmas for their family, while a similar proportion (39%) have trouble making their budgets last over the festive season.

And more than two-fifths (42%) of people are happy to cut back on other areas of spending to make the most of Christmas, more than a quarter (27%) get carried away.

The reasons people gave for blowing the Christmas budget are a stark reminder of how enjoying the festive season can often be a painful struggle between heart and head.

For example, one of the most common answers was people stressing over the need to please loved ones and give their children the “perfect” Christmas.

Some also over-spent because they were dazzled by the latest “must-have” children's gadget, while others simply lost track of what they could and couldn't afford.

This tendency to ignore sensible budgeting combined with stagnant wage growth and the ever-increasing pressure on household budgets means it is not surprising that over one third (38%) of people are “worrying” how they will afford Christmas.

34% of those surveyed, equating to 17 million people across the UK, expect to start 2014 in debt simply because of their Christmas costs, and one third – around 16 million of us – plan to pile their Christmas spending onto their credit cards. One in 40, or 1.2 million people, expect to turn to a payday lender.

If these figures leave you uneasy, here are some tips to help your rein in your Christmas budget.

1: Fix your spending limits... and stick to them

List what you expect to spend over the festive season, from presents and decorations to food, socialising and transport. Keep some cash back to pay the mid-January bills.

2: Compare online prices with those off-line

Shopping online can be cheaper than the high street, especially if you can find a discount voucher code. This is not always the case though, and it's worth seeing what's on offer in your high street. Check delivery charges to get a clear cost comparison and look out for deals which could help you build ‘loyalty points’ on cards.

3: Think twice about tempting treats

‘Buy one get one free’ offers in the supermarket can save you large sums of cash. But if 'special offer' items will just sit going mouldy in the fridge, then you are not getting as much value as you first thought. Shopping online can cut the chances of last-minute panic buys.

4: Freeze essential items

Eat what you need now from your freezer to clear space for freezable Christmas essentials. Buying food earlier and freezing it, rather than raiding the supermarket in the final days before Christmas Day as items fly off the shelves will help you budget and let you build up your stock gradually. Keep a list of what you have frozen and remember to defrost it all in time.

5: Think about all your options before taking out credit

Stores may offer you cards with tempting offers and instant discounts attached, but bear in mind the interest rate they will charge. As with payday loans which offer ‘quick access’ to cash, if you use them, make sure you repay your debt on time and in full to avoid the costs escalating. It’s also wise to consider overdraft charges. While some current account providers offer interest-free overdraft “buffers” up to a certain limit, recent research from consumer group Which? also found that going overdrawn with some banks can be as expensive as taking out a payday loan.

6: Get crafty instead of splashing out on presents

Making cakes, cards and decorations adds the personal touch as well as often working out cheaper than shop-bought items. Cut up last year's Christmas cards and use them to make decorations or gift tags.

7: Plan ahead when sending Christmas cards

Sending a card second class will cost 50p rather than 60p for a first class stamp. Sending your Christmas cards second class before the UK domestic deadline of December 18 will leave you more cash in your Christmas budget.

8: Make a New Year's resolution to start saving earlier in 2014 Saving small amounts regularly from January could make a big difference come next Christmas.

:: Information: More advice to help people have a savvy Christmas is available by using the Money Advice Service's Christmas Money Planner at moneyadviceservice.org.uk

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