Christmas is a time when we want to show how much we love our friends and family. We like to be generous with our gifts and really make an effort.
But often life gets in the way. Either we haven't planned, or the expenses of everyday life prevent us spending as much as we like. Some of us look to our credit cards, store cards, even payday loans to help pay for the cost of Christmas.
So if you really see no other option than borrowing to finance Yule, here are some practical tips to minimise the pain to your finances…
The trouble with Christmas is that money can flow from your bank account like mulled wine at the work Christmas party. And while you may want to have a month off being careful with money, a little forward planning will really help reduce your debt hangover in the New Year.
Draw up a budget. Itemise all the people you need to buy for, as well as all the other spending you might need to make (Christmas parties, cards, decorations, grocery shopping). Set limits on this spending – and stick to them with a Scrooge-like miserliness!
Christmas is very important to a lot of us – so much so that we're willing to go into debt to fund the festivities. If this spending is going to take you into debt, set yourself your own credit limit – this should ideally be an amount that you can clear by the end of January or February.
You should also ask yourself whether you absolutely have to borrow, or whether you can be a little more creative with your budget instead. Do you need new decorations this year? Can you save a little money by getting a joint present for a couple rather than single presents?
Try to work out what you're going to buy everyone before going shopping (so you're not tempted to make expensive impulse buys). Then look to see if you can get any discounts. For instance, if you're buying 6 bottles of wine as Christmas presents for different friends you might be able to get a bulk deal.
Look at voucher websites such as discountvouchers.co.uk or vouchercloud.com to see if you can make a saving. Alternatively look at cashback websites such as topcashback.co.uk or quidco.com to get some money back on your Christmas spending.
This cashback can then go towards reducing your debt in the new year.
Find out the APR or interest rate on your overdraft, credit card or store card. If you have to borrow, use the credit that charges the lowest rate. Be careful when ordering from shopping catalogues – this is credit too and can be very expensive.
As with your Christmas shopping, it pays to put in a little leg work and to shop around. Find the cheapest form of credit you can. And, as above, stick to a spending limit that you can manage and repay within one to two months.
Try to avoid payday loans as the interest rates can be exorbitant.
Similarly Store Cards tend to have higher APRs than credit cards, as well as restricting where you can spend to a single shopping chain (which may not be where the best shopping deals can be found).
Borrowing should always be considered a last resort. Whilst this article is intended to give practical help if you have to borrow – consider if borrowing is really necessary. Not to go Mary Poppins on you but with a bit of time and a little imagination, a great Christmas can be achieved without breaking the bank!
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