It’s no surprise many of us will have a financial hangover as during December over half of us spend more than we earn
YESTERDAY we partied, and today we treat our festive financial hangovers.
Christmas is for giving, and despite dire warnings about falling incomes, rising prices and higher interest rates, our generosity knew no bounds this year.
The nine people the average Brit brought presents for got 22 gifts between them. Financial soothsayers say we are facing the longest fall in living standards for more than 60 years, and prices will continue rising next year.
One in ten of us celebrated Christmas yesterday with 2016’s debt still hanging over us, according to Nationwide Current Accounts, and the average household will take five months to pay off their festive debts.But it is not all doom and gloom — we can get back into the black.
SORTING THE MESS
First things first. What do you owe in total and to whom? With any luck things won’t be as bad as you think but you need to look at the big picture, so don’t ignore the situation.
If you got rubbish presents, flog them online. Even unwanted gift cards can be turned into cash. And root out all those unloved clothes and waffle irons or juicers, too. Someone will want the stuff you don’t.
If you have any savings that aren’t earning much interest, it could be cheaper in the long run to pay off expensive debt. But keep something for emergencies if possible.
Work out what needs to be paid off first — you have to avoid repossession, eviction, fines or service disconnections. Other loans, cards and credit agreements have to be paid, but negotiate to pay them off over time.
Debt plays havoc with your ability to get credit in future but this stops you getting deeper into the financial mire.
If you’ve run up big bills on your credit cards and won’t be able to clear them for ages, shop around for a cheaper card that charges less interest, to load the debt on to.
If you’ve borrowed from family or friends, ask for more time to pay them back. It might cause an almighty row but they won’t want your heating cut off.
You should also charge your working children rent if you are putting a roof over their heads.And stop paying out for things you don’t need, such as gym membership. Put the money to better use.
The latest Disposable Income Index from ISA provider Scottish Friendly showed that more than half of people feel under pressure to create the perfect Christmas.
This comes from family members (52 per cent), TV advertising (38 per cent), friends (29 per cent), retailers (28 per cent) and social media (27 per cent). Nearly six in ten (56 per cent) households said they would make sacrifices to buy Christmas presents and, of those with children, 31 per cent were relying on credit to fund their shopping.
Just over one in eight (13 per cent) families said they would ignore household bills, and one in ten said they would delay rent or mortgage payments to buy presents.
How we splurged
CHRISTMAS was likely to cost us more than £19billion in presents and £4.9billion on nights out, according to a British Airways poll.
We also bought 108million rolls of wrapping paper, 40million rolls of sticky tape, and seven in ten of us had to throw out unwanted food, GP Batteries found.
The average cost of Christmas, according to Nationwide, was £687.40 per family, including gifts, dinner and parties.
Half of us spend more than we earn in December. On average we planned to spend £342 on presents, with £303 of it on credit, a Scottish Friendly survey found.
Asda Money found that a third of us did not check our bank balance before, during or after our Christmas binge.
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You can talk to advisers at Citizens Advice (citizensadvice. org.uk) and the National Debtline on 0808 808 4000. You can also head to My Money Steps at mymoneysteps.org/public/about/money-advice-trust and the Stepchange charity at stepchange.org.
…and how to cut back
NATIONWIDE says 54 per cent of us plan to cut our spending in January. It is hard to get back into the black but here are some simple ideas:
- Buy your own lunch and coffee and save a fortune. Ditch M&S and Waitrose – go to Aldi or Lidl. Never shop on an empty stomach. Frozen veg won’t go mouldy.
- Car share. If it’s good enough for Peter Kay, right . . . And travel off-peak if possible, or buy a season ticket to save on train fares across the year.
- Rent out your drive or spare room.
- Turn the thermostat down and wear an extra jumper.
- Get a grip on the contactless card, it’s easy to run up big bills when you don’t keep count of your spending.
- Check if you had PPI – you may be due a refund.
- Resist the sales – you can’t afford it!
- Find cheap offers online. Check voucher codes before you buy or sign up to mailing lists to get discount alerts.
- Liz Barclay is a debt expert and BBC Radio 4 presenter.