Many of us look forward to the festive period, but for those who are struggling financially, it can bring a lot of undue strain.
In this guide, we explore festive period debt, including what is is, how people fall into debt at Christmas, and the best ways to avoid falling into the festive debt trap.
What is Christmas debt?
While the festive season can be the most wonderful time of the year, they can also take a toll on your purse strings, with people often feeling the pressure to buy the must-have toy on the market for their kids or the most luxurious present for their loved ones.
Data shows time and again that a majority of UK adults admit to overspending over Christmas and New Year, succumbing to the pressure to buy expensive presents, welcome people to their home, and socialise with friends and families. These things come at a cost, and that cost can result in Christmas debt.
Christmas debt is an umbrella term for any problem with your finances brought about by overspending during the festive season.
As mentioned, it happens to many of us, but it doesn’t have to be the case – It’s possible to have a fantastic time during the festive season, without taking on debt in the process.
Common causes of festive debt
Some Christmas debts are direct – the money you spend on the lights and the gifts associated with the season. Other Christmas debts are indirect – the shock bill you can’t afford because you overspent at Christmas, and which gets worse the more you try to ignore it.
Direct Christmas debts
The things that bring joy at Christmas also cost money. There is huge pressure on families to afford certain things, which can leave them stretched financially:
- Presents for children
- Gifts for parents and partners
- Money for socialising with friends and family
- Christmas and New Year getaways
- Food and drink for the festive season
Indirect Christmas debts
People may not fall into debt from funding Christmas or New Year directly, but often the holiday season stretches their budget so thinly that any unexpected cost can send their debt spiralling:
- An emergency expense like replacing a faulty boiler
- A seasonal surge in regular bills like utilities over winter
- Taking out short-term credit (like payday loans) to cover Christmas costs
Should I take out a loan to cover the cost Christmas?
Lots of people fall into the trap of taking out credit, like a Christmas loan, to get them through the holidays. Although you need to repay any loan, seasonal loans often come with extremely tight time frames for repayment. If you fail to repay, you can quickly find yourself in hot water.
Similar to payday loans, Christmas loans can come with high interest rates, meaning you’ll have to pay a sizeable chunk of money on top of the amount you’ve borrowed. If you miss you repayments, you may face increased interest or charges, which can make it difficult to keep up.
If you do find you’ve overspent during the holidays and need Christmas debt help, there are many debt counselling agencies out there who can help. Just keep in mind that the best course of action is not to overspend to begin with.
How do I avoid Christmas debt?
During the holidays many people put the blinkers on and pull their credit cards out.
Sometimes, in the sparkle and glow of Christmas shopfronts, with all the bustle and energy of the high street, it’s easier not to think about the flurry of bills that will be arriving in January – but it’s always important to be realistic about the consequences of your spending.
If you get caught up in the moment while you’re shopping, you run the risk of regretting your unrealistic spending when January comes around.
With that in mind, the best way to avoid running up debt during the festive period is to prioritise. Make sure all your essential bills like your mortgage, electricity, council tax and phone are paid before anything else.
Ignoring these for the sake of festive purchases will only cause you trouble further down the road.
The best ways to avoid debt over the festive period
Once you’ve taken care of these bills, it’s best to sit down and plan out your holiday spending. To make sure you do this in a way that won’t come back to haunt you, you can follow these simple steps:
Set a budget and stick to it
Write out all your expenses and take them away from your income. What’s left is the money you can use for festive spending. Make sure any holiday costs that you include in this do not go over this amount, including future credit card payments.
Plan for Christmas ahead of time
Save a little each month to give you a buffer for extra spending. This is one of the smartest things you can do as the less you have to find during the holidays the better off you’ll be.
Spread the cost
Buying gifts throughout the year helps give you less to buy when the festive period rolls around. If you see the perfect holiday gift on sale in July and you can afford it, don’t hesitate. No one will know or care when you actually bought it.
Keep track of your festive spending– Keep an ongoing record of expenses and always compare it to your budget. If you find yourself exceeding your budget, put on the brakes.
Avoid hidden festive expenses
Keep an eye on your bank balance and credit limit to make sure you don’t face any penalties, overdraft charges or interest. Hidden expenses can be a budget-killer.
To avoid getting into unnecessary Christmas debt, you could always try to raise the money by selling items on eBay, or having a garage sale.
That way you can have a festive clear-out and earn some guilt-free holiday spending money in the process. You might also consider taking on a seasonal job to help you earn some extra cash.
Where can I get debt advice on festive debts?
If you’ve found yourself feeling the January blues when it comes to money, contact us today.
We can give you free, helpful advice on how to bring your situation under control.