How to manage your finances over Christmas


Keeping your spending in check over the holidays can be challenging. Even when we know we can’t afford to overspend, the thought of letting friends, family and loved ones down can urge us to go beyond our means. We share 25 ways you can manage your finances in the run-up to the holidays and avoid a Christmas debt hangover

The holidays should feel magical, shouldn’t they? Spending time with loved ones, watching nostalgic films, playing board games, giving meaningful gifts, and sharing comforting foods. Yet, in the UK, over a quarter of us feel stressed about the festive season. As the holidays draw nearer, nearly half (46%) find even thinking about what Christmas presents to buy is stressful, 45% find the costs to be worrying, and 42% find the general financial impact of Christmas to be stressful.

Around three in 10 of us will overspend during the Christmas period. While that’s down from previous years when up to 43% would spend beyond their means, we still spend around 29% more each December than we do any other month.

It’s estimated that a third of us will borrow money to pay for Christmas. That’s 16.9 million people, feeling the pressure to put gifts, food, and even increased bills around heating, holiday lights, and travel to see family on credit cards, using our overdrafts, or taking out a loan.

But why do so many of us feel the pressure to spend, spend, spend during the run-up to the holidays? And for those already struggling, how do we avoid going into further debt during the most expensive months of the year?

Why do we overspend at Christmas/during the holidays?

Many of us have fond childhood memories of past holidays spent with family, friends and loved ones. Whether that’s remembering picking out the perfect tree together, eating your favourite home-cooked meal with extended family, or that feeling of surprise and gratitude at being given that one special gift you didn’t even know you wanted.

As Counselling Directory member and counsellor Dahlian Kirby explains, our underlying idea that Christmas should be a special time we spend together with our families could be getting overshadowed by our own high expectations.

“The main problem for many people around Christmas is unrealistic expectations. The expectations create pressure to be what you think you should be. This can cause tension and frustration in itself. There is also the possibility that we see Christmas as the time that will rescue us from the boring, the familiar, and even from depression.

“It can lift our mood, as can tasty food and baubles and visits from people we love. However, Christmas won’t cure any issues or problems.”

Our anxiety around being ‘good enough’ and creating the ‘perfect’ celebration can also lead to overspending, Psychotherapist Fe Robinson explains.

“Many people at this time of year feel a weight of expectation, a pressure to make everything ‘perfect’. The pressure to please, along with the intensity of materialistic advertising can leave you responding to a whole series of shoulds, the oughts and musts that may feel pretty miserable.

“You may overspend, agree to things you do not want, or generally find yourself off balance. You may also feel a stark contrast between the socially acceptable idea of Christmas, and the reality of your own life circumstances. It is essential to remember that the festive season is intended to be a celebration and that you have the right to choose how you mark it.”

It’s not just the pressure to buy the perfect gift, host the perfect party, make the perfect food, and travel to every friend, family, or work party we get invited to, that can make our spending (and stress levels) mount. It’s all those extra expenses that come with the time of year. Rising heating costs, food prices, and pressure to give back even if we can’t afford it. Struggling financially around the holidays isn’t a choice. But there are things we can do to try and avoid extra debt that will hang over us in the new year.

How can I stop spending too much for Christmas?

1. Sit down and assess your finances ahead of time

No matter what time of year it is, your first step should be to sit down and assess your current financial situation. What have you already got saved for the holidays? How many paydays do you have between now and when you need to buy gifts, food, or other expenses? You don’t need to figure out the exact figures for everything, but having a rough idea of what you have to work with, and what you can realistically save between now and then can help you to get a more grounded starting point.

2. Set a budget (for everything!) – and stick to it

Once you have a rough idea of your financial situation, it’s time to start mapping out where that money may need to go. Gifts (while one of our biggest worries) aren’t the only holiday expense. Travel to visit relatives and friends can quickly add up, as can food, any new decorations, and even the cost of attending a work holiday party.

Set a realistic budget for each item on your list, and create a way of tracking this as you start shopping. This could mean having a spreadsheet, a note on your phone, or a physical list. Once you start spending, track how much you have left for each part of your budget – and don’t be afraid to start moving things around.

If you manage to get a gift for a friend for less than expected thanks to sales, reallocate that money elsewhere in your budget, or save it as part of an emergency fund. It can be tempting to keep buying more gifts for our loved ones, but this can lead to overspending, worrying about buying ‘just one more’ gift for someone else to even things out, and second-guessing what we’ve already bought.

3. Factor in your regular expenses

The world doesn’t stand still during the holidays. Rent or mortgages still need to be paid, as do utilities, credit cards, overdrafts, loans, childcare expenses, and our regular food shops. With many workplaces paying a little bit earlier in December to ‘help out’ with Christmas spending, this can actually make stretching your regular salary to last throughout the holidays and into January a lot trickier. Don’t be tempted to rely on any early payments from work unless absolutely necessary.

4. Make your ‘naughty or nice’ list

Figuring out who you want and/or need to buy for can be a pain – especially if you’re from a larger family. Parents, siblings, kids, nieces and nephews, aunts and uncles, cousins, grandparents, friends, colleagues – how do you know where to draw the line? Try to establish which people are essentials on your giftee list, and which would just be nice to show your appreciation for.

Once you’ve got your list cut down, you can figure out individual budgets. For those who didn’t quite make the list, you can always make small backup gifts just in case, like baking cookies, making small hot chocolate kits, or DIY salt dough ornaments.

5. Establish expectations early

Cutting down on the number of gifts (or the number of people you’ll be gifting to) isn’t something to be ashamed of or anxious about. But it is important to establish expectations early.

Have conversations in advance with friends and suggest spending time together instead of exchanging gifts. Consider discussing with family how you could all cut back on expenses by only exchanging a single gift, doing a family secret Santa, or only shopping for the kids. Or if your kids are used to lots of parcels over the holidays, sit down and talk to them about how this year will be different if you’re trying a new approach. This can help everyone make their gift-giving decisions ahead of time, and avoid any last-minute pressure to try and match unexpected gifts we hadn’t accounted for.

Plan which extras are worth your time and money. Do you really want to spend £10 on the office secret Santa? How about that £30+ holiday meal with friends – could that instead become a home-hosted event, where everyone brings one dish or drinks, so no one has to overspend? Does anyone really need a £50 beauty advent calendar, or yet another new ugly holiday jumper that will only be worn once or twice?

A lot of small, fun extra events and expenses can really add up. Take time to consider which of these you actually value, enjoy and appreciate – and which are just an extra drain on your budget.

7. Know your spending triggers

‘Retail therapy’ can often lead to compulsive spending, increased feelings of stress, and even serious debt. Shopping addiction can be more common than you might think. Many people emotionally spend to try and cope with feelings of stress and anxiety around the holidays. The pressure to make things perfect, to show how much we care through items rather than actions, and to be ‘good enough’ can all lead to overspending.

Find out more about emotional spending, understanding your triggers, and finding healthier ways to cope.

8. Spend wisely

Avoid impulsive purchases and deals. It can be tempting to splurge when we see offers in stores (especially when advertised alongside big savings), but before you make a purchase, ask yourself: Who is this for? Do I really think they would like it, or am I focusing on the price? What other gift is this replacing?

9. Be proactive: plan ahead to cut down on convenience costs

There are many hidden costs behind convenience shopping during the holidays. Last-minute panic buying not only cuts down on your choice and variety but can lead to additional stress and overspending in ways you might not think about.

Fighting the crowds to try and get last-minute deals can lead to buying more expensive alternatives out of fear of missing out and going home with nothing. All that stress of shopping during peak times may mean you’re tempted to treat yourself to an overpriced coffee, lunch out, or takeaway for the family when you finally make it home and are too tired to cook. Planning ahead can help you save in unexpected ways.

10. Be aware of retail tricks (in-store and online)

Having a budget is one thing; sticking to it? Not so easy. Retailers have countless tricks to encourage us to overspend. From aggressive marketing campaigns flooding our inboxes with high discounts for a ‘limited time only!’, to loss-leading deals to get us in the door and then part us with our money in other ways, retailers know how to create a sense of urgency, tap into our fear of missing out, and make us feel like we have to spend NOW.

Being mindful of these tricks, and sticking to a pre-planned list can be a big help. Remember: many ‘one day only’ sales end up with extensions; competitors often have equally as attractive deals; and there will always be another must-buy temptation, ready when you do have spare money.

11. Switch to shopping online

If you have the time to allow for shipping, shopping online can help to take out some of the pressure you may feel in person. Online, you can price compare more easily, search for extra discount codes, use cashback sites like Quidco or browser cashback extensions like Honey, and even give yourself more space and time to consider your purchases.

Filling your cart, taking a break, and then coming back to reassess what you are thinking of purchasing can help you to more critically consider your spending and filter out those accidental filler gifts and impulsive purchases.

12. Factor in hidden costs

When you’re assessing your budget, remember to factor in the little things. Postage for buying gifts online or sending gifts to loved ones you may not see over the holidays. Wrapping paper (whether posh or budget), holiday greeting cards, gift bags, tags, and ribbons can add up quickly. Consider what’s essential, and what’s nice to have.

13. Price compare

Even if you don’t have enough time for gifts to arrive in the post, price comparing in person is possible. If you’re tempted by something that is on offer, look to see what other brands of the same item are in stock. Often the biggest sale signs aren’t the best deals overall.

Don’t be afraid to compare with other high-street competitors and check out prices on your phone. Found the perfect gift, but it’s much cheaper online than in-store? Consider doing a gift IOU, so your loved one knows that the item is on the way – it’s just not arrived in the post yet.

14. Opt out of Black Friday and Cyber Monday

Black Friday and Cyber Monday have become more popular in the UK in recent years. Rather than single-day events, many have spawned week (or longer) sales, urging you to buy big-ticket tech items, gadgets, household appliances, and more at significantly lower prices. But did you know that these big deals are often the same, if not slightly higher than regular holiday sales? Some stores are even known to put their prices up in the weeks ahead to make the deal sound better on the day.

15. Track your spending

Staying on top of your spending can help to avoid any unexpected worries. Tracking your holiday budget in a spreadsheet, app or notebook can be a good start, but make sure you are also checking your accounts regularly, and noting down any other unexpected expenses that may have popped up.

16. Shopping for kids or your partner? Remember the rule of three

While there are many different variations on the rule of three, the general idea is that you stick to the limit of giving three gifts to those you love. These three gifts will each have a special meaning, with more thought and time put into them. A common theme for these is to go with:

  • Something they want
  • Something they need
  • Something to read

17. Presence, not presents

Take a moment to step back and assess what the holidays are really about for you and your loved ones. It can be easy to get caught up in trying to find the perfect present when, actually, what our loved ones would most enjoy is having us fully present in the moment, spending quality time together, making memories, and just being with the ones we love.

18. Consider starting a new tradition

New traditions can replace old, expensive habits. Why not suggest a family secret Santa or gift exchange, where everyone buys a single gift for one other family member rather than everyone buying gifts for multiple people? Or why not consider a white elephant gift exchange to lighten the mood and keep spending low?

Switching to only buying for the children in the family can be another way of saving while still feeling an overall sense of holiday spirit. Or consider exchanging non-monetary gifts between adults, like a free night of babysitting for family members with young children, a homecooked meal or offer to do some gardening.

19. Trade holiday parties for group volunteering

Holiday parties with friends can be expensive. Between the cost of a meal out, drinks, and gifts, it can feel like another thing on a long list to stress about. Why not suggest a group volunteering day or activity instead? Foodbanks, soup kitchens, and homeless shelters all often need volunteers, whether it’s for a day, afternoon or evening. Find out more about how you can give back over the holidays.

20. Consider making, instead of buying

Homemade gifts can be both a money-saver and a thoughtful way of creating something memorable. Photo gifts for grandparents are always a favourite, or consider batch-baking cookies, making fudge, or other tasty holiday treats. Just remember to cost up the price of making things first, and to consider how far in advance you can make any edible treats without risking them going stale.

21. Limit self-gifting

Research shows almost a quarter of us self-gift over the holidays, treating ourselves to new clothes, consoles, tech or makeup. This is often due to us feeling unable or unwilling to tell others what we want, or not expecting to receive gifts at all. While you may feel like you deserve a treat, putting off self-gifting until after the holidays can help avoid accidental overspending and feelings of guilt. If you do still have room in your budget, there is always the boxing day or January sales.

22. Look for ways to make travel cheaper

If you are travelling to see friends and family, try and price compare different options ahead of time. Booking train tickets in advance can save up to 60% with some train operators. Just remember to double-check that any public transport options you are considering are fully operating around the dates you plan to travel.

23. Don’t be afraid to share worries/concerns

While three-quarters of us are happy talking about the cost of gifts with our partners, just a third feel comfortable having these conversations with parents, friends, siblings, or children. It’s good to remember that you aren’t the only one struggling financially at the moment – and probably aren’t the only one feeling nervous about speaking up about it.

Having these conversations with our families and loved ones can help take the pressure off for everyone involved. Counselling Directory shares more about talking about money with loved ones without feeling anxious.

24. Start working on your savings plan for the next holiday season

Once the holidays are over, give yourself time to reflect on what worked and what didn’t. Now is the time to learn from past mistakes, start planning for next year, and consider spreading the cost and planning over a longer period of time to avoid any last-minute squeezes. For some people, joining a Christmas club is a good solution – just remember, these come with their own risks.

25. Pay off any holiday debts quickly

Even the best-laid plans don’t always work out. If you have built any debt up over the holidays, it’s important you tackle this head-on and figure out the best plan of action. If you have money on a credit card, seeing if you can switch to a low or 0% interest card can buy you a little more time while you make payments. If you have money spread across an overdraft, loans, or credit cards, compare to see which has the highest interest rate, and ensure you make overpayments on this one first.

If you’re worried and aren’t sure where to get started, find out more about what to do and where to get support for debt problems with MoneySavingExpert.

No matter how the thought of preparing for the holidays is making you feel, try to remember: the holidays aren’t about spending money. They’re about spending time with those that you love.

The pressure and guilt when we can’t create our idea of the ‘perfect’ Christmas are real, and it’s healthy to acknowledge these feelings. But it’s also healthy to work through why you may be feeling this way so, in the long run, you can avoid falling back into the cycle of stress, anxiety, pressure, and even debt, when the holidays come back around each year.

Do you need to see a counsellor to talk about the holidays? For more information about how therapy can help you with the holiday season, visit Counselling Directory.


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