Binge spending at Christmas

January Survival Guide: How to Manage Your Finances After Your Christmas ‘Spending Binge’

Posted on 16th January 2020

Millions of Brits face January financial woes after binge spending at Christmas.

But, what can you do about it?

Well, it turns out, you can do quite a lot!

Almost one in ten of us feel pressured to spend more than we could afford just before and over the festive period. At the same time, 1 in 10 Brits have fallen into debt, or further into current debt, due to spending too much, according to the Money Advice Service.

We feel more pressure to spend more, which in turn, leads to further debt.

That’s a vicious cycle!

Our research into Christmas spending found that:

  • 21% felt they spend too much on Christmas food
  • 30% found it hard to budget for Christmas
  • Alarmingly, a quarter felt that Christmas moved them into financial difficulty

Ah yes, financial difficulty. Here we are again…

The problem becomes worse when you consider that most workers got their paycheck just before Christmas in December – meaning that people will have a more extended wait until their next payday at the end of January.

A new year, a new you, right?

Well, not quite. A recent poll conducted by claimed that 27 million people, nearly two-thirds of the UK working-age population – are beginning 2020 in debt.

However, it is not all doom and gloom. Based on some of the financial decisions we’ve made ourselves, here’s several ways to re-organise your financial obligations and survive the long hard month of January. Heck, you might even end up with a little extra cash!

1. Paying January’s council tax bill

The council tax you pay is determined on the ‘band’ property you reside in. If you don’t know which band you have, you can find out which one you’re in here. Band A homes are the cheapest, whilst Band H is the most expensive. Band D serves as a good indicator of properties in the middle.

To know precisely what you have to pay is to look at your local authority website – you can find yours here.

A single occupancy household could receive 25% off their bill if someone lives on their own or no one else in the house counts as an adult. ‘Non-adults’ include anyone under 18, students live-in carers and student nurses. You can find the full list of the exempt occupations here.

Many councils encourage payees to pay by direct debit – there may be a discount for this, so check with your local council. And don’t worry if you don’t have a bank account, new rules mean that everyone is entitled to an entirely free one.

If you feel you are paying too much in council tax, because your house band is wrong, then you can ask for a review. Getting a review and being ‘re-banded’ into a lower band will save you money.

Beware though; if you are ‘re-banded’ into a higher band, your council tax payments will increase. You can find out how to get reviewed here.

If you’re struggling, there may be additional help. You can apply for a Council Tax Reduction if the council has a hardship scheme. Please note this is not currently available in Northern Ireland. 

You can search whether your local council’s contact details here to check if they have a hardship fund in place. 

2. Cut your credit card costs

People with existing store and credit card debt will save hundreds of pounds by transferring their credit balances to another credit card provider offering a better rate or terms

A couple of credit cards are now offering interest-free for 29 months, meaning you will pay no interest on your existing debt well into 2022!

Balance transfer credit cards can be a perfect way of saving money on existing debts. Your aim should always be to have paid off all that you owe by the end of the promotional period. Not doing so will only further exacerbate your debt situation

According to official industry data, the weeks immediately after Christmas are typically the most popular for switching card balances. In January 2019, borrowers made 701,000 transfers, with over £1.5 billion moved with the average amount transferred being £2,198.

The primary benefit of a 0% balance transfer deal is that all of your monthly repayment goes towards clearing the outstanding balance. 

Halifax and Sainsbury’s Bank are among balance transfer credit cards offering 0% interest on balance transfers for up to 29 months. Meaning you will have nothing to pay until 2022 in interested fees! 

You must be disciplined, though – never use this type of card for additional purchases. If you do not follow all the terms as per the small print, then the 0% promotional rate will be terminated immediately. 

Plus, be mindful you will still need to pay a balance transfer fee, typically £30 per £1,000 transferred.

3. Change your overdraft rate

An authorised overdraft is for short-term borrowing, but the costs do vary. Several banks have daily fees; others have monthly; some charge interest and others use a combination of both. Overdrafts are often thought of as a silver bullet to debt management, but this has been exposed as a myth

Because of this, new industry rules designed to make overdrafts simpler and fairer will be in force by 6th April; with most banks currently changing their pricing.

Nearly all banks have overdraft calculators on their websites. The first step is to check and compare what other financial providers would charge you if you wanted an overdraft with them and then compare to your own.

4. Change your current account, maybe?

Banks are attempting to persuade consumers to switch to them using a switching service, and in the process are offering a cash incentive to do so. For example, HSBC is offering up to £175 to switch on individual accounts!

M&S Bank is enticing new customers with several perks, including clothing vouchers, drinks vouchers and other treats.

Even if you are overdrawn, according to the Current Account Switch Service, you can still switch your account. 

However, you will need to agree to what overdraft you require with the new current account provider. 

5. Switch utilities

Switching utility suppliers is one of the most straightforward ways to reduce your monthly outgoings. 

The practice has become even more popular this year with Energy UK revealing more households have switched electricity and gas supplier than ever before. Using price comparison sites is one of the best ways to change and can show you precisely what other offers are available. 

According to uSwitch, customers could save on average £447 a year. Furthermore, households can switch broadband, mobile and TV packages to other suppliers to save costs. 

It is worth examining how much you pay each month in utility bills and determine whether you could be paying less either on another deal or with another provider. Plus, ask yourself, do you need all those TV packages… movies, sports and other high costing packages?

Another option: Consolidate your debt

If you are juggling various costly obligations, including store card and credit card borrowing, you may be able to save money by combining them into a single loan. 

Known as a debt consolidation loans, these are where your entire credit amounts are consolidated into one loan, and one monthly repayment. The loan’s end should fully repay the debt. Debt consolidation loans are not the answer for everyone, but for some people, it will help a lot. 

The prime benefit is to reduce the number of your repayments each month and to reduce the total amounts paid back, plus reduce the amount of interest you will pay. 

But doing this, consider whether you need another form of credit and if another product such as a credit union or borrowing from family might suit your needs better.

Final thoughts

January is a tough month to survive – early pay before the Christmas holidays, and the increased binge spending due to the presents and food makes it daunting to face.

But, all is not lost. Use this new year opportunity to make some new savings on your personal finances. You’ll be set up for Christmas 2020.

Need further help with debt? You can find out more here.

Author: Katre Kaarenperk-vanatoa

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