Christmas Debt

This Christmas, give yourself the gift of a good start to 2009.

Even now, in the midst of the credit crunch, 21% of the people questioned by Abbey Credit Cards were planning to put Christmas shopping on their credit card.

Christmas debt: don’t do it!

“Everyone loves to splash out on special occasions,” said a debt expert at Think Money, “but is it really worth it if it means you’re starting the New Year with a pile of debt you can’t afford? With cold, miserable weather and no holidays to look forward to in the near future, most people find January depressing enough without adding money worries to the equation.”

And Christmas debt isn’t just depressing: “Starting the New Year with your finances in disarray can be dangerous. Psychologically, adding to a debt is much easier than getting into debt in the first place – if someone owes £1,000 anyway, they might not be put off by the thought of owing £1,100, or £1,200 or £1,500.

“It’s a slippery slope, as they say. Before they know it, all those extra ‘bits’ of borrowing have turned a debt they could pay off in six months into one that’ll still be with them in 2010.”

But celebrations don’t come cheap. Food & drink, presents & visits, ‘socialising’ and going out – it all adds up. Is it realistic to cut the cost of Christmas without cutting out the fun?

A debt-free Christmas?

The analysts agree. We’re expecting a more frugal Christmas this year. According to R3 (the Association of Business Recovery Professionals), the average person is expected to spend £379 – a 27% drop on last year’s £521.

Even so, 1 in 3 respondents said they would feel guilty about not giving the kind of gifts they’d like to. This Christmas, according to money.uk.msn.com, around £2.2 billion will be spent on unwanted gifts – so on average, we’ll all receive £37 worth of presents we simply don’t want.

“While it’s heartening that people care so much about giving, no-one we care about would want us to dig ourselves into debt for their sake. What’s more, there are plenty of ways to be generous without racking up debt.”

Debt-free generosity – a few ideas:

Give non-cash presents

Are you creative? Do you have some free time? Can you do something that other people can’t?

• Depending on your skills, you could make presents for family and friends – anything from a knitted scarf to a nicely framed photo.
• Or you could get really creative and give them a voucher for your time and skills, promising to mow their lawn, baby-sit their kids or paint their house. It’s up to you. Think of what you can offer – and what your family and friends would love to let you do!

Set a budget and stick to it

Figure out what you can afford to spend and what that means for every person on your list. Remember every pound counts – overspend by £2 here and £3 there and you might find you’ve gone through your food budget too!

Wherever possible, pay with cash:

• Seeing the notes disappear is an excellent reminder of how much you’ve spent. Credit cards are just too easy – and anyway, with the credit crunch reducing the amount of credit available, it makes sense to leave any ‘spare’ credit on your card as an emergency fund. You might need it later.
• Don’t go for ‘buy now, pay later’ deals – do you really expect your finances to be much better six months from now? If not, won’t paying ‘later’ be just as painful as paying ‘now’?
• If cash simply isn’t an option and an overdraft looks like the best way of borrowing what you need, make sure you arrange it with your bank first – unauthorised overdrafts tend to come with much higher interest rates.

Time your shopping

Don’t go shopping on Christmas Eve. Leaving it to the last minute increases the chance you’ll spend more – on something they’ll like less.

Even if it’s too late this year, next Christmas is a long way away. Keep your friends and family in mind throughout the year and you could:

• Find them more appropriate presents,
• Pay less for them, and
• Spread the cost of next Christmas.

Don’t start 2009 in debt

It’s easy to ‘spend spend spend’ when you’re in a holiday mood, but don’t forget what the economists are saying about the year we’re about to enter: a shrinking economy, growing unemployment, limited access to credit, house prices falling, more homeowners in negative equity…

In short, not the kind of year you’d want to enter with a mountain of debt.

Tags: christmas debt, xmas debt

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