Christmas can be one of the most expensive times of the year as well as one of the busiest, meaning it's easier to fall prey to the money mistakes you’d usually avoid. We show you how to avoid getting caught out.
Christmas, the time for giving and goodwill, is invariably also a time for spending – whether that’s on gifts, the Christmas turkey, or celebrating the New Year with a night out. As such it’s even more important to keep your wits about you and make sure your budget doesn’t become a Christmas casualty. Here’s how to keep a firm hand on your finances at Christmas and beyond.
Know your limit
There may be several limits that you’re tempted to push this Christmas, but the limit on your current account shouldn’t be one of them. If you do have an overdraft, make sure you stick within its limits and don’t go into unauthorised territory; likewise if you don’t have an overdraft make sure you don’t dip below zero. You’re very likely to be slapped with a fee even if you only stray slightly over your limit.
If you think you may need to dip below your limit over Christmas the best thing to do is to discuss this with your bank as they are likely to allow you a temporary extension – and though this may still cost you, it will cost you significantly less than if you dip into the red without asking.
Careful with your credit card
If you don’t have any savings to dip into and have no other alternative but to borrow, spreading some of the cost of Christmas onto your credit card can be a useful way to shoulder the expense. But remember that whatever you spend on your credit card at Christmas will have to be paid off in the New Year as soon as you get your statement otherwise it’ll start clocking up interest at an astounding rate.
As such it’s really important to use your credit card only as much as you can afford to – that means not spending so much on it that you can’t afford to foot the bill in January.
Don’t over-spend
Easier said than done, but keeping a simple budget can pay dividends when you’re trying to cover the cost of Christmas. Amid the flurry of Christmas sales, last-minute gifts and stocking up on food it’s easy to get carried away and spend every last penny in your account.
Doing so may mean that you can’t afford essentials in the New Year such as food, electricity bills, or worse still, your mortgage payment. So resolve to cap the cost of Christmas to a set amount for gifts, festive drinks, and so on – so that you can still afford living expenses come January.
Don’t forget important payments
As Christmas is one of the busiest times of year you’re likely to be concentrating on several different things at once – planning the day itself, deciding what to do with the kids, panicking about what to buy your Mum, and that’s just for starters. This means that important bill payments can easily get swept to the bottom of your priority list, and could even be forgotten altogether if you’re not careful.
So give yourself a helping hand by writing down every bill that needs to be paid or payment that needs to be made in December and January, then set yourself reminders so that you can have the peace of mind they’re covered.
Beware the cash machine
At Christmas time it can be really tempting to withdraw more cash than you usually do when visiting an ATM, particularly if you are out celebrating. Even worse is using your debit card as a tab at a bar if you run out of cash, which is likely to lead to a nasty surprise in the morning when you check your balance! To solve this problem withdraw a sensible amount before you go out, then leave your debit card at home. That way when you run out of money, there’s no danger of spending any more.
Another trap that’s easy to fall into but not so easy to get out of is using your credit card to withdraw cash. You might think after a few drinks on New Year’s Eve that there’s no harm withdrawing a tenner on your credit card if you plan to pay off the balance as soon as you get your statement – but doing so will have dire consequences.
Not only is it likely that you will you be charged a fee for your withdrawal, but the interest on the withdrawal will be costly and applied as soon as you get your hands on the cash; plus the transaction itself is likely to get pushed to the back of your credit card balance queue, meaning it accrues plenty of interest before you can get round to paying it off.
