How to stay out of debt at Christmas

Many people feel pressured to go all out, even if they can’t afford to! Maybe they feel the need to impress a partner or want to make sure the kids have a Christmas to remember.

But at what cost?

We at TRDG do not want to see anyone struggling financially in January because they overindulged this Christmas. So, here are ten tips to help you avoid debt and still enjoy your Christmas.

Let’s go!

One key reason people end up in a bad financial situation after Christmas is because they have a "spend now, worry later" attitude. This is a no-no! You need to be honest with yourself about what you can afford to spend at Christmas. If you spend without keeping tabs on how much you’re spending, that’s a surefire way to end up with a nasty shock when you open your credit card bill in January.

To avoid stressing about your financial situation til next Christmas, use our budget planner to calculate how much money you have in your Christmas pot.  Allocate an amount to each person you want to buy presents for, any Christmas parties you intend to attend, etc. Do not exceed the amount you budgeted for!

If you do it this way, you won’t start the year with a bumper bill to work off when January comes around. If you're shrewd, you may even have some of your Christmas budget left.

It’s very easy to get caught up in the Christmas spirit. However, if you’re using your credit card or any other form of credit as your financial means, with the mindset of, “I will pay it off in January," you’re missing an important point.

The reason you're using your credit card as your means to purchase is (in most cases) because you cannot afford what you’re spending money on. If you could afford it, there would be no need for credit.

Remember, most companies pay people’s wages before Christmas, so if you’re living paycheck to paycheck, January could be tough as you could wait five weeks for your next salary instead of four. Unfortunately, your expenses may not wait for that, so you must take that into account as well.

The bottom line: Spend based on what you have, not on what Mr. Banker can loan you!

A common trap people fall into (but may not like to admit) is to spend to compete or keep up with others.

A member of your friendship group has just announced that they will be going on a winter cruise and have extended the invite to everyone else in the group.

It’s a tempting offer. Everyone’s on board, and you're the only one left to decide. You know it's a stretch for your budget, but your partner and kids are excited. You’ve had a tough year and could really use a break. Plus, you don’t want to be the odd one out. Your credit card is practically calling your name.

Stop!

It's crucial to remember your financial plan. This spontaneous expense is not part of it and is beyond your means. While it may seem like a reward for your hard work, the truth is that you'll be back to the grind, working even harder to clear the credit card debt.

Trying to keep up with the Joneses is a slippery road to financial difficulty. Now we mention that, check out our article Keeping up with the Joneses. How to take control of your spending.

Your partner...

Never feel pressured to buy expensive or large quantities of gifts.

On more occasions than we care to mention, we've seen one person in a relationship spending extravagantly trying to impress the other. Gifts or gestures should never be based on price; they should always be based on meaning. Some people in relationships feel pressured because of their partner's expectations. Others cave to societal pressure, while their partner has no expectation of extravagant gifts at all!

Your children...

This applies to more than just your significant other. Our children can often lead us down this road, too. Don’t buy lots and lots of unnecessary gifts for your children, especially young ones. We get it: When you love someone so much, you can’t help but do everything you can to make them happy.

Just remember, young children find so much joy in the smallest gifts. Before buying, ask yourself why you’re making the purchase. Is it because your child wants it, or is you instigating the purchase?

Finally, if you choose to host Christmas dinner, remember no one wants to eat leftover Turkey for a week. Don’t feel pressured to buy enough food to feed an army. If you can’t afford to pay for all the food, don’t feel embarrassed to suggest that everyone bring a dessert. Most people will be happy to chip in; they are not blind to how expensive the festive season can be.

This tip is gold, but most people find it difficult to do: purchase and give gifts after Christmas. What? You might be thinking. Read on, and you’ll see why this is a great tactic.

People generally feel gifts need to be given and opened on Christmas day. We totally get that; it’s the magic of Christmas. Waking up on Christmas morning and opening presents in your pyjamas are all part of the fun! Do understand that Christmas Day has been completely commercialised. It is not a day where Christians all rush to church; it has become a day where gifts are the focus.

So, you should know that retail companies look to maximise earnings during this period. They know that many people will be spending money at this time because they feel they must. That’s why manufacturers like Microsoft or Sony release a game console or certain games leading up to Christmas and spend a lot of money advertising them. It makes good business sense.

The sales begin... Boxing Day, January sales… Prices start plummeting. The retail companies know that spending will decrease after Christmas and may still have high stock levels, so they try to entice anyone with a bit of money to spend.

So why not purchase the costlier items after Christmas? Your family members can still open the less expensive items on Christmas day, so the fun is still there. There’s nothing worse than paying more than you need to for the same item. Also, who would complain about another day of present opening?

Change your mindset. Don’t follow a commercialised process, especially when you cannot afford to.

Christmas spending doesn’t all have to be done the week before Christmas. Monitor your finances during the year, and buy a few gifts whenever you have some extra money. Spreading the cost of present buying over a more extended period can help keep you away from the temptation of using credit at the last minute because you don’t have the money available at short notice.

In addition, you might catch a few sales during the year that are unavailable around Christmas. Black Friday and Cyber Monday are prime times to grab a bargain.

The week before Christmas can be spent sipping mulled wine and nibbling on mince pies!

When you’re on a budget and have a family with children, costs start adding up. Those of you who are parents know how it is. You try to make sure you spend the exact amount on each child or buy the same amount of presents for each child. Otherwise, you may get accused of favouritism!

Now, there’s your partner (if you have one). You may think you know what your partner would like by guessing. However, there’s nothing worse than paying a lot of money for a present to find it still unused in a drawer or cupboard months later.

Now is the time to get creative. Instead of buying physical gifts, consider arranging a day out or a trip away for the whole family. A cosy cottage getaway or go-karting day can often be more affordable than a pile of presents. And the best part? These experiences create lasting memories that a game console or handbag simply can’t match.

There's nothing more valuable in this world than time. The time you spend on someone by making a present means more than just buying something off the shelf or ordering something online. A painting, a song, food or a patchwork quilt, anything that will mean something to the person you give the gift to.

It doesn’t always have to be Louboutin this or Prada that. The time and effort spent walking into a shop, purchasing the product and then walking out again does not come close to the time and effort spent making a present.  Never feel embarrassed to say, “Money is tight, so I made you something”.

Something you spend minutes buying can take months to pay back. Regardless of how you look at it, time will be spent; you just need to decide how you use it.

Buy one, get one free! 3 for 2!

These offers and similar ones can help you fill your gift bag and reduce your Christmas food bill. Look out during the lead-up to Christmas for the 3 for 2 or free gifts with a purchase offers. These gifts can add significant value to your purchases, making you feel like you're getting a great deal. Very savvy people can make up some people’s presents on offers and freebies alone.  

Offers, like the ones we have mentioned, can give you little presents for an extra person.

When it comes to food, it’s not about buying cheap, it’s about buying smart. Again, look at what offers are around that can remove a few pounds from your food bill. Remember, it’s not the quantity but quality that’s important when it comes to the food you put into your body. By making informed decisions, you can feel responsible and in control of your holiday spending, without sacrificing the quality of your meals.

And finally...

What do you want for Christmas?

If more people were asked this straightforward question, less money would be wasted, and many would be better financially. We get the whole element of surprise, however, there is nothing worse than spending a lot of money on something that you really cannot afford. To then have a conversation like this -

“Are you going to wear that watch I bought you?" prompting the following response: “Oh yes, I’m just waiting for the right occasion."

This means that if I leave it in the drawer long enough, he/she will hopefully forget he/she bought it.

You might think you want to purchase something expensive to give as a present, but the receiver may have their eyes set on something much more affordable. You won’t know this if you don’t ask!

Asking this question can also help with planning and budgeting; you should know where you are financially. If you cannot afford to buy the present the person is asking for, tell them! Don’t feel embarrassed. No reasonable person wants a loved one to struggle financially to buy them a Christmas gift!

The Real Debt Guy is a qualified financial adviser and a UK debt expert. The information in this article is considered to be true and correct at the publication date.