Money is a touchy subject for many, but it shouldn’t be. Normalise talking about it and you’ll become wealthier for doing so. To start, long term wealth doesn’t just come from your income. How you spend, save and invest your money are equally important to creating your financial freedom.
Today we’re going to deep dive into saving for Christmas. As one of the largest annual financial outlays in many households, Christmas, a time of joy, can become a stressful endeavour.
Don’t go into debt for Christmas
You’ve seen the pictures on social media where there are countless gift bags, consoles and on occasion, a ribbon wrapped car being
shown off presented to the world.
I have absolutely no issue with anyone spending money on gifts for their loved ones. It’s your money and you will choose to do what you wish with it. What I do have issue with, is going into debt for gifts you cannot afford. In 2021, over 14% of the general UK population expect their debt level to increase over the festive break.
If you want to know why this is horrible, please read our article on compound interest and then reverse this to work against you!
So while, this may seem like a strange post for a time when we’re just about to hit our 2 days of Summer (it’s coming, I promise), it’s a timely reminder, that with a little bit of preparation we can stick to our budget and ensure financial success this Christmas and beyond.
How much do we spend on Christmas?
In 2021, the average person was expecting to spend £1,108 during the festive season. This was up over £200 vs 2020 where the average spend at Christmas was £883 (source: yougov). Data isn’t available for 2022 at this time, but I do expect this to come down somewhat in light of market sentiment and conditions.
In last years data, 37% of those polled expected to spend more that they should over the festive period and many put the cost of this onto their credit cards or funded it by dipping into their existing savings.
Well my friends, not this year! Not on my watch.
Budgeting for Christmas
As a reader of this site, you’re possibly aware that I’m a fan of the old budget. For many, a budget sounds archaic. Something your finance team use to squeeze every last penny and justify restricting purchases. It’s anything but!
Budgeting should be seen as a tool to look forward at your spending and helping you make decisions about spending on things you actually value. A budget helps you plan and provides guidance if and when you need it.
Number 1 rule for Christmas – Set a budget you can afford!
It doesn’t matter if you spend £100 or £10,000 on your Christmas, as long as you can afford it. Having an agreed budget each year, we can forward plan and prepare our finances to ensure our spending remains in control.
Now is the time to start saving for christmas
Saving for Christmas isn’t sexy. It sounds a bit odd to be talking about it in July when everyone else is planning their Summer holidays. Thinking forward and delaying gratification are some of the key traits you need to develop on your path to financial independence.
To be honest I’ll probably post about this again in January, as thats really when we should be considering our next years personal finances. But we’re here now and we’re planning for a financially successful Christmas.
Saving for Christmas....In July!
With 5 months to prepare financially, saving for Christmas doesn’t need to be difficult. Follow our table below to understand how much you need to put aside each month when saving for Christmas.
Save £600 by December
£120 per month
Save £800 by December
£160 per month
Save £1,000 by December
£200 per month
Save £1,200 by December
£240 per month
Save £1,400 by December
£280 per month
Save £1,600 by December
£320 per month
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5 ways to effortlessly start saving for Christmas
If you want to start saving for Christmas, it couldn’t be easier in 2022. Below our some of our top tips. Whats’ best for you, is a completely personal decision and none of the tips shown below should affect your current lifestyle too much.
- Set up a Christmas savings pot – Within Monzo and other digital banks, you have the ability to set up savings pots. Use these to separate your savings from money you can spend and watch this accumulate over the year. Also make a point of not touching this savings pot except for Christmas, unless you have an emergency.
- Create a Christmas budget – The cornerstone of financial independence is budgeting. Knowing how much you need for Christmas is key. Once you have a budget, create a saving plan to reach it.
- Credit card rewards – *cough* Amex points can be used pretty much anywhere online, but importantly they can be used on Amazon. Use you accumulated points to keep your Christmas costs down.
- Cut back on other spending – Don’t forgo the coffee if you enjoy it a couple of times a week, but look for easy savings each month. Remember, just like a puppy, a budget isn’t just for Christmas. In saving for financial independence or any event, it is key to understand that delayed gratification will benefit you over the long term.
- Make saving money automatic – With Monzo and IFTT you can set automatic rules to save money. You can save in cool ways like: Saving for a holiday whenever it rains. Every time you spend, you save £1 or moving money into a pot every time you tweet.
Getting into the mindset that saving for Christmas is a good thing and not a deprivation, is key to success. Gamify it if you have to, but stick to it! Christmas will be infinitely more enjoyable knowing that it’s paid for in full, before you sit down for the Christmas turkey.
The best time to start saving for Christmas was yesterday. The second best time is today!
The earlier you start saving for Christmas the easier it will be. If you’ve any additional advice or comments on creating a Christmas free of debt, please leave a note in the comments below.
Ho ho yeooooow!