Enjoying Christmas Without A New Year Debt Hangover

23rd November 2010

With millions of people throughout the UK still struggling with debts arising from last year’s Christmas spending, we consider the best way to ensure that you prevent additional debt building up during this year’s festive period.

2.3 million people are still paying off credit card bills from last Christmas according to the mystery shopping organisation Consumer Intelligence.

Given that credit card interest can easily reach 29% APR, using credit when you do not have enough money to pay off the balance in January may well be very expensive and lead to additional debts that hang around for months or even years. In the most serious cases this can ultimately lead the necessity of a formal debt solution such as a trust deed.

The good news however, is that this situation can be avoided or at least controlled with a little thought about affordability and the use of a budget. This is, of course, especially important for anyone who has already started a protected trust deed and therefore has a restricted budget by which they’re already living.

Setting the budget

At this time of year, many people start thinking about the people that they want to buy presents for and what might be a suitable gift. However, by starting at this point they miss one vital part of the process… setting their budget.

Before you make a Christmas gift list we suggest that you review your finances and decide what you can afford to spend.

This amount can be worked out in many ways. However you go about it, the most important thing is to set a budget you will be able to repay by the end of January… and then to stick to it.

Making a gift list

Now you are ready to list the people you need gifts for. But instead of immediately putting gift ideas next to each name, first split your present budget between each person.

The amount of money you allocate to each person may well not be an easy decision. However, once you have finished, the total expenditure should not exceed the budget you have set for yourself.

Now that you have established how much you will spend on each person, you can think of gifts that will fit within the budgets that you have set.

This process may even actually make your Christmas gift shopping experience much more straightforward as you can immediately narrow down the options of what to buy each person on your list.

Paying off any balances in full

Sticking to a spending budget will give you the best chance to stay debt free (or stop your debts from increasing) this Christmas.

But the final and most important step in the process will not happen until the New Year when all the festivities have come to an end. If you have used credit you should look to pay off your Christmas debt balances in full.

If you have stayed within your budget this should not pose a problem. However, the temptation to actually spend more in January can be understandably high and especially with the New Year sales being constantly promoted.

It is important to keep to the plan and use the available money you have to pay off the Christmas expenditure.

The risk of not doing so is that the Christmas debt contributes to an escalating debt total which could start to run away with itself. If interest starts to be added, it can be hard to catch up and the debts could become a major long term burden, or even a debt problem that requires you to look at formal debt solutions such as a trust deed.

Article Contributed by:

James Falla

BeatMyDebt.com

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