Budgeting at Christmas: How to avoid New Year debt

09 October 2019

With Christmas looming, how many of us get to December and realise that we have not budgeted? Most of us probably don’t even know exactly what we spent on presents last Christmas. Many of us get caught in a familiar cycle of overspending on unwanted gifts, then trying for months to pay off the debts! 

How To Plan a Christmas Budget 

There are several ways to budget for Christmas. In the first instance, try and work out what you spent last year then set this as your budget for the following year. Then divide that amount by 12 and setup a monthly transfer into a savings account. 

Alternatively, you could set a fixed affordable amount for each person, then divide this by 12 and transfer that amount into a separate account ready for your spending spree! The final option is to set a fixed amount for each member of your family and to stick to it! For example: 

Husband - £50 
Son - £100 
Daughter - £100
Grandparent - £50 
Niece - £50 
Nephew - £50 
Aunt - £50 
Parent-in-law - £50
Friend 1 - £30 
Friend 2 - £30 
Friend 3 - £30 
Work Colleague 1 - £20 
Work Colleague 2 - £20 
Contingency - £100 

Total - £730 

It is human nature to make impulse purchases so allow yourself a contingency in your budget. This also helps overcome the embarrassment of receiving unexpected gifts for which you want to reciprocate! 

Financial Alternatives to Christmas Gifts 

Instead of giving cash, or buying an unwanted gift card, how about setting up loved ones with a long-term investment such as an ISA or a pension?  Anyone can add money to a junior ISA, plus the money is locked away until the child turns 18.   

A fun alternative could be to purchase some premium bonds for your child/grandchild. With a minimum investment of £25, you could win up to £1,000,000 tax free.  There is an annual prize fund interest of up to 1.4% which means that you should win enough prizes to receive an annual return of up to 1.4%. Your chances of winning for every £1 bond number is 24,500 to 1! 

For a gift that last longer than Christmas, fun alternatives include adopting an animal at a zoo or buying a membership to a local wildlife or cultural institution. Many charities offer gifts through their websites, which helps your money go to those who need it. 

The secret to a successful and debt-free Christmas is all about planning! This way you know your budget and can take advantage of discounts that are on offer at various times of the year A bit of creative thinking and forward planning will save you stress and money- plus avoid making last minute purchases!

Happy Shopping! 

Categories: Advice