Christmas is a time for celebration, but it can also be costly. If overspending during the holidays is one of your annual traditions, our guide to festive period debt is here to help
What is festive period debt?
It might be the most wonderful time of the year, but Christmas definitely isn’t the cheapest. Debt may not be the first thing that comes to mind when you think about the festive period but, according to a recent survey by Lowell, 74% of UK households rely on credit cards and loans to fund their seasonal spending.
Unfortunately, even if we’re careful with our money for the rest of the year, the holidays can come with a lot of pressure to spend. Whether it’s buying the perfect gifts, heading out for Christmas dinners and drinks (and paying for the new outfits, taxis, and babysitting costs that can go with them) or covering the higher electricity bills that come with your outdoor light display.
If this sounds familiar, it’s important to know that you’re not alone. In fact, overspending at Christmas is so common that there’s a special term for it: festive period debt. Essentially, this is a catchall term used to describe the financial issues caused by spending too much at this time of year.
What are the most common causes of festive debt?
Christmas spending can quickly get out of control; here are just a few of the ways you can end up blowing the budget during the festive season:
- Gifts
Father Christmas can’t cover everything. It’s all too easy to end up with a long wish list for fulfil when it comes to Christmas gifting. Often, it’s not just your close friends and family who need presents, you may feel obligated to buy gifts for your kids’ teachers, your neighbours, your office Secret Santa…the list goes on!
- Socialising
How many times have you heard the phrase, “we must catch up before Christmas”? Spending time with friends and family is one of the best things about the festive period but these get-togethers can be expensive. Once you factor in the extra costs involved like transport, childcare, and hair appointments, seasonal socialising can quickly add up.
- Travel
Many of us like to use the Christmas break to get away from it all and jet off for some winter sun. But even if you’re not escaping to somewhere exotic, you could end up spending more than you think travelling to visit friends and family. Flights, train fares, and even petrol costs can all be more expensive at this time of year.
- Food and drink
Everyone loves a festive spread but a turkey and all the trimmings, a few boxes of Quality Street, and a case of Prosecco can all make your December food shop much more painful when it’s time to check out.
- Emergencies
Unfortunately, the Christmas period often comes with cold snaps and stormy weather. These conditions can lead to unexpected house emergencies that need to be covered, whether that’s your boiler suddenly breaking down or a leak coming through the roof.
- Utility bills
When the nights draw in and the temperatures drop, you’ll probably find yourself reaching for the light switch and the thermostat more often. Add in the fact that you’ll be spending more time at home during Christmas and powering the extra lights that make the festive period feel so special and your December energy bill can be a bit of a shock to the system.
Should I use a loan or credit cards to cover the cost of Christmas?
When the costs of Christmas start to escalate, it can be tempting to reach for a quick fix. Putting it all on a credit card or taking out a short-term loan might feel like the best option right now, but once the gifts have all been opened and the decorations put away, you’ll be left with the debt. If you then find yourself struggling to repay your festive period debt, you could negatively affect your credit score and find it harder to get finance in the future.
How can I avoid festive debt?
The good news is that festive debt isn’t inevitable, you can take steps to avoid debt and still have a great Christmas without overspending:
- Set a budget
Everyone spends money at Christmas, but many of us go into the festive period without a fixed budget in place. To work out how much you can afford to spend, start with your monthly income, and then subtract all your essentials – your rent or mortgage, utility bills, car payment, food etc. The amount leftover is your disposable income and that’s the money you can comfortably afford to spend during the festive period.
- Plan ahead and spread the cost
There’s no reason why you have to make all your Christmas purchases in December. In fact, if you can plan ahead and spread the cost throughout the year, you’ll be much more likely to stay within budget. This not only gives you time to save but it can also mean you take advantage of things like mid-season sales, early booking periods for train tickets, and interest free payment plans for festive trips abroad. The more organised you can be, the better.
- Keep track of your finances
With a busy December diary packed full of festive activities, it can be easy to lose track of your spending. This could mean accidentally ending up in your overdraft – and facing extra charges as a result – or making late payments. Make it a habit to check your bank account every few days so you’re on top of your income and outgoings throughout the month.
- Manage your gift list
There’s a lot of pressure surrounding gift giving at Christmas, which is why it can be helpful to remember that it really is the thought that counts. A survey by YouGov found that only 2% of people place the most value on receiving gifts, while 45% feel that spending time with loved ones is more important at this time of year. Set boundaries when it comes to your gift giving, whether that’s a limit on the amount each person will spend on one another or even introducing a Secret Santa for your friendship group rather than buying a gift for everyone.
- Get creative
Traditions can be great, but there’s no reason why you have to do the same thing year after year if it forces you into financial difficulty. Why not mix things up? Suggest a get together at home with your favourite Christmas film instead of meeting up for dinner, ask guests to Christmas dinner to bring a dish with them, or spend time with your kids making homemade decorations rather than splashing out on new pieces.
