With summer fast approaching, the memory of Christmas is fading, but are you still feeling the financial impact of your Christmas spend? Maybe you overspent on gifts and food or increased your credit limit to cover the costs; it can very easily happen. For many people, this is a reality which means the debts accrued at Christmas can take much longer than January to pay off. The average person in the UK will take 7 months to repay their Christmas debt, taking them well into the summer months. If this sounds familiar, here is what you can do to help improve your situation.
Review Your Current Christmas Debt
It is always best to start by reviewing the whole situation, which may not make for a pleasant outcome to begin with. Start by reviewing your bank account, especially if your overdraft was used to help pay for Christmas. Then check through your credit accounts, such as any credit cards or loans that you have used over this period. By looking at your total costs accrued over Christmas, you will be able to understand how much in total needs to be settled. According to a survey by debt charity Step Change, as many as 33% of people use credit to pay for part of or all their Christmas spending, with 59% stating presents for friends and family as being the biggest expense. Checking all available statements will clearly show your spend and provide the clearest picture of what was spent on Christmas.
Not all people choose to borrow money to pay for the festive period, with 51% of people instead cutting back their spending, which reduced their overall costs. Generally, if you can afford to spend less at Christmas, especially if you do not have the available funds, it may help avoid any long-term debts arising into the new year.
Make a Repayment Plan & Prioritise
After you have reviewed where your Christmas spend came from and the amount there is still to clear, making a repayment plan is the next best step. Having some sort of plan in place can help alleviate any feelings of stress towards the situation and provide a clear avenue and timeframe of being back on top of your finances. Unfortunately, it can be easy to forget about how exactly you will repay the costs you have accrued over Christmas whilst spending and how quickly you can overextend your finances. According to research from Deloitte, people in the UK spend 39% more at Christmas than those throughout the rest of Europe, with an average £567 per person spent on gifts, food and drink, travel, and socialising.
You will need to prioritise the debts you have to repay, starting with those that are costing you the highest amount of interest. It can be tempting to pay off the smaller debts first, but if you have the majority of your Christmas debt in a high-cost loan or credit card, leaving these until last could cost you more to pay overall, with interest accrued on top of the amount borrowed. The average credit card in February 2020 had an interest rate of 20.77%, with the average debt per household on credit cards in January totalling £2,595.Prioritising the payments which have high cost implications in the long-term can help to keep the total costs of your debt down.
After you have singled out the debts you have that are most important to settle first, you can work out how much you can afford to pay to start reducing these. If you are unsure how much you can pay, you can use one of the many online budget calculators to help work this out. Both the Money Advice Service and Citizens Advice have these that are simple to use. If you can only afford to pay a small amount, then if you have credit card debt you will need to make at least the minimum repayment each month. However, by doing so it will take much longer to repay the debt, with it taking people over 26 years to pay off the average credit card debt amount. Ensuring that you meet the minimum payment amounts can also help to avoid additional fees/charges and other financially impactful circumstances.
Contact Your Creditors Directly
Contacting the creditors who you currently owe money to and speaking to them in detail about your financial situation can help you to put a plan in place to help you to alleviate some of this debt. This is particularly important if, after working out your budget for repaying your Christmas debt, it is much smaller than you expected or possibly showing you have no affordability at all. Speaking with your creditors can be daunting, but most are able to empathise with your situation and look to help come to a repayment agreement. As many as 1 in 20, approximately 2.3 million people, in the UK had missed repayments on everyday household bills in order to fund their Christmas spend.This means many people have Christmas debts on top of existing debt issues to resolve. Speaking directly to these creditors, especially if any are for essential bills such as a mortgage, rent or utility bills, will enable you to improve your situation.
Avoid it Happening Again Next Christmas
Once you have managed to come to an agreement with your creditors and have repaid your Christmas debts, preparing yourself for the future can help to avoid falling back into the same cycle. As many as 22% of people report not taking any steps to manage their Christmas finances, with only 1 in 4 having a set budget for their Christmas expenditure. feel that Christmas is an expensive time of year and that it comes with social pressures. Nearly a third of social media users have reported feeling pressured to have a good Christmas based on other people’s posts, whilst 19% feel they have to prove this by posting, according to Sept Change.
It is possible to have a great festive period without spending lots on food, drink and gifts. Christmas is about spending time with your family and friends, and with a set budget, it is possible to enjoy this festive period without the lavish expenses.
If you are faced with a financial emergency however, at any time of year, then Wizzcash may be able to help. Find out more about our payday loans here.