Top tips from our financial expert, Martin Upton, on how to ensure that after the excess of Christmas spending we start the New Year on a firm financial footing.
Tips to turn Christmas into a financial success rather than financial excess!
With the festive season now in full swing, and the customary over indulging in food and drink often being matched by overdoing our spending, we once again also start to brace ourselves for the subsequent financial shock when the credit card bills land on our doormats and PC in-trays in the New Year.
Here’s what I would suggest to help you turn keep on track of your spending over Christmas.
Set yourself a budget
First, draw up a budget for your Christmas spending – not just presents but the additional spending on food, drink and socialising. Embed this Christmas element of your budget with the rest of the household budget so that you can manage the overall effect Christmas spending has on your finances. Don’t allow yourself to be pressurised – even by your children or close family into spending more than you can really afford.
Factor in the extra spend
Make sure you know how the extra spend over a normal month is going to be financed. Perhaps it means withdrawing funds from a savings account – in which case make sure you access the money from the account paying the least interest. It may also mean cashing-in the balance held in a ‘Christmas Club’ account – built up during the year to spread the burden of the Christmas spend.
Cash in your vouchers and store credits
Maybe you also have credits on your store loyalty cards. These don’t earn you any interest so cash them in to help finance your Christmas spending.
Pay off your credit cards
If you use a credit card try to ensure that you pay off the balance in full when the bill arrives in the New Year. Generally credit cards are expensive ways to borrow money – and store cards are even worse given that they have high interest rates. If you are taking advantage of credit card deals that offer 0% rates on balance transfers make sure you know the date at which this introductory, ‘teaser’, rate comes to an end and pay off the balance prior to then. The good news, though, is that using a credit card to shop gives you protection if goods are faulty under what is known as ‘Section 75 protection’ (of the 1974 Consumer Credit Act) provided the cost is £100 or more.
Be savvy about your overdraft
If you are funding your spend via an overdraft make sure the overdraft is authorised and make sure you know the interest rate and any other charges your bank applies to overdrafts. Don’t use an unauthorised overdraft as this is likely to attract high charges. If in doubt check with your bank first.
When it comes to shopping some further good rules apply. Shop around and look for deals – many retailers are discounting there prices even as the festive season gets underway and there are good deals to be had. Fashion retailers have had a difficult few months as the warm autumn has hit spending on clothing designed for autumn and winter – so many are discounting prices to get customers through the door.
Additionally media stories have highlighted the fierce competition between the supermarkets providing opportunities to secure your Christmas shopping at bargain prices. Be prepared to provide shopping vouchers or credits as a part of your Christmas presents – Christmas is always followed by the sales period (starting with some retailers immediately after Christmas Day has finished. Used after Christmas these gifts will be able to buy their recipients more than prior to Christmas. You even may want to snap up the bargains in the sales in readiness for next Christmas too!
Don’t miss out on the money-back guarantee
As ever keep your receipts in case presents need to be exchanged or refunded – and for those items you send to your friends put in a gift receipt to enable them to return the goods if needed.
Stay in control
Finally keep a close check on your spending – maybe by compiling the running total on your mobile phone or tablet. The bills will come in after Christmas as surely as night follows day – but you are better placed to manage them if you know what the bottom line of your spend on each card etc., amounts to.
Work on your money skills
One further thing you can do to help is to sign up to the OU’s award winning MOOC ‘Managing My Money’ which goes live again on FutureLearn from 8 January next year. This course 8 week facilitated course, supported by True Potential llp, covers all the key aspects of personal financial management including budgeting.Studying ‘Managing My Money’ will give you the skill set to manage the financial consequences of next Christmas even more effectively.
Sign-up to Managing My Money
Enjoy the festive season and have fun at Christmas and the New Year – and good financial planning will help you to enjoy not only the festive season’s celebrations but also the New Year too!
Written by Martin Upton, Director of the True Potential Centre for the Public understanding of Finance (PUFin)