Brits rein in Christmas budgets following Spending Review
The second annual money.co.uk Christmas Shopping Index has revealed the impact of the Government's Spending Review on planned Christmas spending this year. The study, which gauged Christmas plans before and after the Spending Review, found that 40% of British households will spend less than planned as a direct result of the Review. On average those spending less will cut their budgets by 32%.
Prior to the Spending Review, the average British household was planning to spend £717 on Christmas, a 43% rise on last year's figures. In total, Britain seemed set to splash out more than £17.7bn on presents and festive treats over the Christmas period. Following the review, those plans have changed:
Those households cutting back (40%) will, on average, spend £485. They'll save £232 per household as a result
296,000 (3%) households will cancel Christmas altogether, cutting their spending plans by 100%
53% of households will not change their plans, sticking to a budget of £717
Overall, the average British household will spend £624 on Christmas this year - £93 (or 13%) down on the pre-Review figures
Total British spending on Christmas will still reach £15.4bn this year - down £2.6bn compared with pre-Review figures.
Despite the cutbacks, this still represents a £3.8bn leap in spending compared with Christmas 2009, when many were cutting back at the height of the recession.
Worryingly, however, the study again reveals that Brits have largely failed to set aside any money to fund this spending spree. Less than 14% of Christmas spending will be funded with money saved specifically to cover the cost of Christmas, down from 15% last year.
As a result, many households will have to find ways to close a £13bn gap between their spending plans and their Christmas savings this year. This gap will see many turning to general savings, debt and ‘money available at the time' to fund Christmas.
Chris Morling, MD at money.co.uk said: "It is obviously a shame to see so many people being forced to cut back on their Christmas plans, particularly as so many seemed to be planning to make this year special after cutting back in 2009.
"However, even these cut backs could be undone because, as a nation, we still haven't come to terms with the idea of spreading the cost over the course of a year. If we are not careful we are going to suffer another Christmas boom and January bust cycle and, with the VAT rise coming hard on the heels of Christmas this year, there is a sting in the tail."
Money management issues
Morling believes that the British reluctance to plan ahead for Christmas spending is symptomatic of a wider feature of our nation's ‘money management' - betraying a tendency to react to circumstances rather than plan ahead.
As a result, money.co.uk has made sure that one of its 50 new free, interactive personal finance Goals is specifically focused on making it easy to save money at Christmas. The new Goals break down specific personal finance objectives into a series of achievable steps, each complete with clear advice, guidance and a comprehensive range of tools and resources. It is part of the most comprehensive online resource designed to help Britain get on the front foot when it comes to money management, with the support, advice and encouragement of others striving to achieve the same financial goals.
Make up for lost time
With six weeks remaining until Christmas, it is not too late to get organised and it is possible to make real savings without cutting back on the magic of Christmas, according to Morling.
He said: "Easing the financial strain of Christmas is not just about putting money to one side. It is also about finding ways to spend less without cutting back on the things that make Christmas special. I would urge anyone keen to avoid a New Year hangover to start planning their Christmas spending now by trying our ‘I want to spend less on Christmas without cutting back' Goal."
Go to money.co.uk/goals and start the ‘I want to spend less on Christmas without cutting back' Goal to benefit from this practical approach to saving money at Christmas.