How to prevent a financial hangover this Christmas

There have been plenty of surveys suggesting we’re all intending to spend less this Christmas, but even if we do, December is still likely to be full of financial potholes. So, how do we make sure we’re not suffering a financial hangover once the festivities are over?

1 - Make a budget

It might sound like the most obvious of suggestions, but the reality is that even if we do make a budget, many of us will get caught up in the moment and splash out on a few extra bottles of fizz, or, (my personal issue), another set of twinkly lights to deck out the garden.

Giving yourself a bit of room to indulge in festive largesse is not just okay, it's therapeutic, especially after the year that’s been. Everyone wants to treat their friends and family and it’s particularly hard to say no to your kids, especially if they still believe that Santa is picking up the tab. But nobody will thank you for putting yourself into serious debt and you’ll probably find most people are relieved if you bring up the thorny issue of gift giving.

Pretty much everyone is in the same boat and it's likely that your next-door neighbour, old university mate or all the mums at the school gates will be delighted if you decide to call time (or at least a hiatus) on gift giving, which has become more habit than joyful experience. 

How to beat lifestyle creep

Remember it’s not just about gifts, you’ve also got to think of Christmas parties, frocks for those parties and the festive feast you’ll be tucking into on the big day (and all the days around it).

If you are the one on hosting duty, consider asking your guests to bring a course or a couple of bottles, or you could get each of them to put some money in the kitty – that works particularly well if your guests have got a long way to travel and it’s something we’ve done in my house for the past 10 years.

Finally, your employer might pay you a bit earlier than usual, which is lovely and usually pretty handy. But it means there’s a whole lot more month before your next wages drop into your bank account, so make sure you set aside enough to cover all your normal expenses.

2 - Keep track of spending

You might think if you’ve set a budget, you’re already keeping track of spending, but the truth is facilities like Buy Now Pay Later (BNPL), credit cards and quirks like payment on receipt of goods offered by the likes of PayPal can make it incredibly hard to keep on top of outgoings.

If you’re really dedicated, make a list of everything you buy, what payment method you use, and check the debits off as they appear on your online banking app.

With more of us than ever using BNPL – and often from different providers – it’s really important you make a note of the terms, the amount and the payment dates. And also factor in the minimum amount you will be required to pay on your credit card and when that’s due.

Obviously if you can pay off your credit card immediately and avoid paying any interest, that’s the ideal. But that’s not always possible. If you can at least pay more than the minimum every month that will help you pay off your debt faster.

3 - Use vouchers and offers wisely

Big discount events like the Boxing Day sales can be seductive but it’s also easy to get caught out by a deal that is too good to be true.

If you’ve got a couple of big-ticket items on your wish list, you’ll probably already have a good idea of how much they sell for. If you don’t, it’s worth doing a bit of investigating so you don’t get caught out.

Lots of supermarkets have loyalty schemes and last year one well-known retailer was giving customers a free bottle of gin (which was a welcome addition to my liquor cabinet that I didn’t have to pay for). 

Some of the vouchers have a limited lifespan, so make sure you check use-by dates and, though it can seem like a faff, you can make a significant amount of cash if you do any of your festive shop via cashback websites.

Finally, keep an eye out for scammers - with all the extra spending, it’s a fertile time for fraudsters to prey on the unsuspecting.

4 - Give yourself a cushion

Remember both December and January are long, cold months and once the tree and decorations have been packed up you might be dealing with a few extra bills as debt payments fall due. If you are lucky enough to be gifted cash or get a bonus payment with your December wage, try to set some aside to cover any unexpected bills that crop up in the new year.

It might sound tacky but there are lots of places to sell off unwanted gifts, or toys and clothes that have been supplanted by new favourites. I kept the boxes that my kids’ Lego came in year-after-year and once they were done with it, I made more than 60% back on original the purchase price.

There are also a whole host of side hustles out there that can help you generate a little extra cash just when you need it most.

How a side hustle can boost your income

5 - Take a quiet moment to re-assess

Normally it’s the New Year that prompts calls for a financial detox or establishing good habits, but you can use a lull in festivities to take a few moments for financial self-care. If you haven’t already totted up any new debt payments, that’s a good one to consider.

Detox your finances – and your drinks

If you’re off work and bored of the Christmas TV schedule, you could set aside half an hour a day to do some financial housekeeping. Do you have any savings and if you do have you made sure you are getting the best interest rate? Have you checked to see if you might breach the personal savings allowance and have to pay tax for the first time? We cover this in our article, the taxman is coming for your savings – how to stop him.

Is your fixed rate mortgage coming to an end in the next six months and, if it is, have you already locked in a rate? Remember you can renegotiate if a better deal comes up in the meantime but it’s worth being prepared.

Have you used up all your allowances for things like your pension and your ISA – if not do you have any opportunity to do so? What about your pensions? Do you know how many pots you have, if you’re on track to reach your retirement target and have you considered pulling them all together in once place?

There are websites, including AJ Bell, that can help you consolidate and take some of the stress out of the process.

Consolidating pensions with AJ Bell