A red Christmas for 30 million Brits
Almost three quarters (71%) of Brits will pay for Christmas on the ‘right now' this year, despite the effect of recession on household budgets according to a study commissioned by money.co.uk. As a result, 30m British adults are set to start 2010 staring at an £8bn hole in their collective household finances.
The research found that, whilst 31% of adults are worried about paying for Christmas, just 15% have made an effort to spread the cost over the course of the year. The rest will fund their share of the nation's £11bn Christmas splurge using a combination of credit cards (14%), savings (10%) and ‘money available at the time' (71%). Meanwhile 4.7m adults (10%) admit that they are still paying off debts from last Christmas.
The reliance on paying at the last minute could see many families stretched to the limit financially. If current trends continue, each household will spend close to £500 on food and presents, even though average disposable income per family per week stands at just £164. As a result, it is likely that many households will feel the January pinch even more keenly than usual, with the Christmas spending hangover combining with winter fuel costs and the long wait for payday adding up to a grim start to 2010.
Good intentions
With the pressures of a recession in mind, some Brits are hoping to keep Christmas costs down, although similar predictions in 2008 proved unfounded once the shopping frenzy began:
43% intend to spend less on gifts
31% will buy presents only for their immediate family
14% will recycle and pass on unwanted presents
Those sensible plans seem set to be tested again this year, with 62% of Brits keen to ensure that the recession does not detract from ‘the magic of Christmas.'
Chris Morling, managing director, money.co.uk said: "There is no reason at all why families across Britain should not have a wonderful Christmas this year, but you have to worry about the effect all this last minute spending will have in January. Lots of people are likely to be very short of cash going into the New Year, which would not make for a great start to 2010."
Top Tips
For those determined to pay for Christmas at the last minute, the following tips may help to limit the pain in January:
1 Take control of your finances: Have a look at your finances and work out what you have coming in and going out over the next three months.
2 Set a sensible Budget: From that work out what budget you need to allocate. Be realistic, don't set a budget you can't stick to and plan for any last minute unexpected items.
3 Shop Around: The key to success at Christmas is being canny and keeping an eye out for the best deals. Some sales are already on, so start ticking off those presents now by picking up a sales bargain.
4 Be card smart: If you're planning to pay for Christmas on a credit card this year, there are some sensible measures you can take to reduce the pain later:
Cashback Credit Cards: most cashback credit cards pay between 0.5% and 5% of any purchases you make, e.g. if you spend £500 on your credit card over the course of a month you get £25 cashback at the same rate. These cards tend to suit people who can pay their balance off in full each month as interest rates may be higher than standard credit cards.
0% Purchase Credit Cards: Some providers offer 0% on purchases as an introductory offer. For example, Tesco is currently offering 0% on all purchases for 12 months. As an added bonus you'll also earn Clubcard points as you spend, which will help when January comes. However, it is important that these cards are not used simply to delay a problem for a year. The balance should be paid off before the interest free period expires, either through monthly payments, or by regularly putting money aside in an interest bearing account so the card balance can be cleared in one go before interest is charged.
Some do's and don'ts:
Don't be tempted by store cards, which often charge very high interest
Don't be tempted to get a loan to pay for the additional expense of Christmas. Be realistic about what you can afford.
Do agree a present budget with friends and family, so everyone is clear what to spend and there is no pressure to spend more than anyone can afford
Do start thinking about next year, by looking into regular saver accounts that can offer a really attractive rate of interest, see money.co.uk/savings-accounts.htm