It’s not my job to tell you how to spend your money. Well, it is, but really it isn’t. Yet, if I start the conversation around money and help people like make informed decisions, there’s a better chance that they’ll be positive. Well, that’s my theory anyway.
Now this article is a strange one. It’s the middle of the year and we’ve just come through one of the warmest heatwaves in years. Yet, in my opinion, there’s no better time to start saving for Christmas than right this minute, or this Friday which is payday for many of us.
Thinking about the old saying “ The best time to plant a tree was 20 years ago, the second best time is now” and this is true for most things in life, whether we’re investing or saving for near goals, far goals, small goals or lofty ones.
How much do we spend on Christmas?
According to the Bank of England, a typical household in the UK spends just over £2,500 in a month. But in the run up to Christmas, our spending habits change and we spend on average almost £740 more in December, which is 29% more than in a typical month.
Who’s paying for this?
I’m glad you asked. While a lot of you will have a budget in place, and this will cover annual expenses such as Christmas gifts, it is common for many of us to underestimate what we spend on Christmas and in December in general.
Aside from gifts which are a huge factor in our increased spending at Christmas. Many of us go to parties or socialise a little bit more than normal. Getting new clothes for these festive occasions adds to the cost. Don’t get me started about the price of a taxi home now either….. That’ll blow the budget entirely.
Even if you don’t go out, having guests over and feeding/watering these guests can contribute to the increased spending many of us face. Christmas dinner can cost a little bit more than we would normally spend. And you know what, that’s ok.
Christmas is a time to be social. I get it. I do it too and for many years I didn’t budget until it was too late to do so. There are plenty of us. People like the old me, people who forget to budget at all for Christmas. But this is less than ideal and it causes a time that is meant to be joyous, to become filled with stress and anxiety. Though with just a little bit of preparation and planning, you can afford to spend this Christmas exactly how you wish.
Sadly, others will go into debt to pay for Christmas. Money is already tight this year and the increased pressure on household finances might be too much to cope with on their own. While sometimes unavoidable, the worst thing you can do for your finances is to go into debt to pay for Christmas.
Not on my watch though! And that’s the purpose of this article. To help you to plan now, so that you can enjoy Christmas to the fullest extent, without putting pressure on your finances now or in December.
How to save money for Christmas
As my Dad always says “Failing to prepare is preparing to fail” and this is true for most things in life, but it is particularly apparent for your finances. Saving money for Christmas shouldn’t be complicated and with a plan, you can make it as painless as possible.
If you start with June’s pay packet, saving just £1 a day will get you £210 saved. And if you skipped the £4 coffees, you could save well over £800 for Christmas.
- Create a Christmas budget
- Set up a Christmas sinking fund
- Start saving earlier in the year
- Create new Christmas traditions
- Track your spending
- Cut back now
Create a Christmas budget
If you saw our household Christmas budgeting spreadsheet you’d laugh. It’s 2 columns with a very small list of things we expect to spend on this December in addition to our normal monthly spending.
- Food & Drink in
- Travel or overnight stays
- Nights out
- Gifts (Broken down by person and a value-added at each name)
Budgeting doesn’t have to be complex and you could easily create a Christmas budget on a piece of paper. I don’t even mind if it’s not accurate either, because life isn’t defined and Christmas is AGES AWAY. But if you’re in the general ballpark now, that’s good enough and just having an idea of what you plan to spend this Christmas is key!
Set up a Christmas sinking fund
When we have an idea of what we plan to spend this Christmas, we need to put this money beyond our immediate reach to ensure we assign it to our Christmas budget. This term in the personal finance world is called a sinking fund. So we next need to create a Christmas Sinking Fund or to you and me, a Christmas Savings Account.
Automate your saving
I am a huge fan of the Pots feature that Monzo Bank provides and other digital banks have similar features. If you haven’t done so already, set up a specific pot for your Christmas spending and set the target amount to match your expected budget.
You can automatically send money to this account each month or you can use the Salary Sorter to manually send the money once you get paid. For the money-savvy among us, you can also set up an Instant Access Savings Pot that currently returns 3.70% (June 2023).
And don’t forget to use the automatic round-up function to grow your saving on autopilot.
Start saving earlier in the year
The earlier you start saving the less you’ll need to save each month. Honestly, you’ll see an article like this from me each January. Very few will take action because they’re still counting the cost of Christmas and paying it off well beyond the big day.
Starting to save early is key. And it can minimise the potentially huge financial shock that not saving can have on a household.
Just £50 a month saved from January onwards can cover the majority of any additional household spending. Whereas if you leave this to December, you may be scrambling to find the money.
Create new Christmas traditions
Saving for Christmas is one thing, but saving on Christmas is another entirely. I’ll cover this extensively later in the year, but by creating new Christmas traditions you can save significantly on the cost of Christmas.
Some ideas might be a little alien to you, but with everyone in the same boat this Christmas, they often make sense for family and friends.
- Sharing the cost of Christmas dinner or nights in
- Secret Santa gifts
- Choose experiences over things
- Buy in the sales
All of these ideas are things we’ve tried ourselves and you know what. They work. They work so well that other friends and family members have begun doing the same.
Track your spending
One of the main reasons Christmas becomes so costly is that we often overspend. Think about last Christmas. How many times did you just “add one more thing” to the present list, or say yes to another night out? If you’ve budgeted and planned for it, who am I to challenge these decisions? If you haven’t though…
As you buy gifts throughout the year or spend money on your festive activities record the money you spend in your Christmas budget tracker. This way you’ll know exactly how much you spent and be less inclined to overspend.
If you buy things in the January sales to put away for Christmas, these can be long forgotten by the time December comes around, so tracking your spending with a Christmas budget planner can help remind you when December is upon us.
Cut back now
Some of you reading this article will listen to my voice and take action. That’s amazing. You’re doing great. Some of you won’t and this final message is for you.
You might think that you can’t afford to save for Christmas right now. And I promise you that if this is the case, you’ll not be able to cut back in December. So this is my stern voice Just in case it’s not clear. Cutting back now means you’ll be less likely to need to cut back in December. It also means you’re reducing the chances that you’ll need to go into debt.
And I can’t stress that enough. At all costs avoid going into debt to pay for Christmas. I know people who were paying for last year into April of this year and among everything else, this was a huge regret of theirs.
Cutting back now and putting all of the above tips into action will help to save Christmas #savechristmas
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