Christmas was lovely, wasn’t it? All the decorations, the excitement, the warmth and joy of spending time with loved ones – not to mention the food, the drinks and the presents!
But all of that “loveliness” comes at a cost – and one that most of us have to face in January. I don’t know about you, but looking at January’s credit card bill is one of my least favourite annual activities.
So how can we stop every year being the same cycle? This article will help you to refresh and reset your family finances.
Here are my 3 top tips to make next Christmas less “draining” on your bank balance:
Tip one: Play Christmas BINGO
January is a prime opportunity for playing games – let’s face it; it’s dark and wet; and no-one’s going “out” to socialise – so BINGO is a way of whiling away the hours.
BINGO stands for “Buying Intentionally Not Going Overboard” – catchy, right?!
I know, it sounds twee – but actually, this is one of the key reasons that we do overspend at Christmas – we forget to be “intentional” with our purchases and plans.
I always write down every single thing that I bought for Christmas when I play BINGO in January – even the small things. Then, I ask myself, did that purchase, that gift, trip out, extra bit of party food or the third pudding that we ordered “just in case” – really ADD VALUE to Christmas? If the answer is no, then it doesn’t make it into the budget for next year – no matter how small, how “insignificant” the cost might have been.
I have a friend who goes to Home Bargains every year, about a week before Christmas. She never normally shops there, in fact, she’s already done all of her Christmas shopping and planning before even venturing in. So she’s got no real reason to go. But every year, she spends £75-£100 in there, on what she calls “Christmas Tat”. Little games and trinkets that the kids will enjoy for 10 minutes, snacks to add to the snacks that she’s already bought “just in case”, Christmas themed mugs for Xmas Eve hot chocolate (while she already has plenty of mugs) – you get the picture.
The truth is, we all love making this Christmas feel more special than the last, especially with the last few years of Pandemic life – but that feeling doesn’t come from buying – it comes from spending quality time with the people that we care about – and they really won’t miss the “Christmas tat”.
Once you’ve played BINGO with all of your spending – you should have a good idea of what your real, ‘value added’ Christmas cost you. For me, it’s around about £1,000 all in, including New Year.
Once you know that figure – I want you to divide it by 10. 10, not 12 – because we’re not going to save towards Christmas in either January or December. Then each month, starting in February and ending in November, you’re going to put away £100 per month (bonus points for doing it by standing order and not having to “remind” yourself).
If you’re like me, you’ll start spending for Christmas again in August (early sales are great for presents), but that’s okay – because you’ll already have £700, and your standing order will save the other £300 over the next three months, just in time for the festive food order.
Tip Two: Split it, or transfer it
The January bill for Christmas can be a biggie – and all the future planning in the world doesn’t make the bill you’re currently facing up to go away. So I’m about to give you the advice that you rarely hear from finance professionals – it’s okay to carry a balance.
Providing you make the minimum repayment on an outstanding credit card bill – your credit score will always remain intact (a big worry for people when I say this). But don’t worry – you’re not going to be making “the minimum”.
Most credit cards have an APR of around 17.9%, so whilst it’s not in your long-term interests to keep a balance, doing it for two or three months won’t incur a huge charge.
Let’s assume that your post-festivities bill is £3,000. If you pay off £1,000 each month, you’ll end up repaying £3,085 over 4 months – (interest of just 2.8%), or paying £500 per month, you’ll repay a total of £3,158 over 7 months (interest of 5.3%). That means rather than potentially having to raid your savings to cover Christmas, you’re actually buying breathing space, and making those repayments more manageable, for around £23-£28 extra a month.
If you don’t like the idea of paying short term interest, you can also look to transfer your balance to a card that will offer you a 0% interest rate for an introductory period – just make sure that the 0% period will be long enough for you to cover off all the debt within that time.
Tip Three: Scrapbook it, Rent it, Swap it
This is my favourite tip about Christmas – because it’s one that we often overlook. How many times do you get to Christmas and think, “I wish I had” or “We could do with”? If you’re anything like me, it’s quite often.
I always make an effort during December to take photos of our decorations, our tree, the activities that we do as a family, and the festive food that we make and have it in a scrapbook on my phone. Why do I do this?
Simply because it helps stop my “impulse” to buy lots of new decorations or activities for December – because I can remind myself of what we’ve got in the loft (let’s face it, no one ever goes up there the rest of the year), and stop the urge to splurge on new things.
In the same vein, did you know you can rent lots of Christmas things? From trees to baubles, garlands and outdoor lights, renting could be a way of cutting down on your Christmas costs, and having to find somewhere to store everything. You can even do the same with clothes – from party outfits to fancy pyjamas for your Christmas Eve movie night – so there really isn’t a need to hit your credit card with lots of new purchases.
Finally, what about swapping? A group of my friends have a selection of Christmas decorations that we “swap” between us, so that no-one’s house looks the same every year. It’s a great way of ensuring that your decorations get lots of use, you get the joy of a different “festive” look each year, and you’re sharing the cost of Christmas between you – win-win.
So once you’ve got Christmas planning out of the way – what next?
Here are my top 3 tips for refreshing January’s finances – to make this year your best one yet.
Tip One: Have an Events Calendar – and Budget
I tell my clients to think about two different financial plans – one for “events”, and one for “real life”.
January is a brilliant time to sit down with your calendar and think about all the special events that you have planned for the year. Anything that you’re going to want to spend a bit more on celebrating; like birthdays, wedding anniversaries, graduations, births, christenings.
Total up the number of these expected events that you have over the year. In my house, for example, we have 6 big celebrations coming up this year. Then set yourself a realistic budget for each of those events. Let’s say, £200 per event = £1200. Over the course of 12 months, you’re looking at setting aside £100 per month as your event “budget” – and when each event arises, you know that your “max budget” is £200.
I hear you asking, what if my first “event” is in January, or I have several close together? I hear you – my birthday is in January. The point of the event budget isn’t just that the money is “there” for you to access – it’s that it gets you into a mindset of deliberately setting “aside” money specifically for those events – and nothing else.
So when it comes to my birthday at the end of the month, I would have £100 “set aside”, with another £100 to “fund” from my real life budget. But because I’m not funding all of the costs from my normal budget, it’s more manageable, plus – I’ve already told myself that my “max budget” is £200 – so I’m capping the amount that any event will cost me; meaning that I’m less likely to spend “out of control” or end up with an unexpected debt to repay.
Tip Two: Trim the Fat
Lots of my clients believe that they have no “superfluous” direct debits or payments going out – particularly if they have done a “cull” before. But the truth is, if you live in a house with multiple people, especially teenagers, you’re more than likely paying some debits out for “free trials” that never got cancelled, multiple Netflix accounts in one house (true story), or even a Gym membership that was a resolution from too many years ago.
So January is a great time to trim that fat – and go through all of those payments and get rid of the ones you (and your kids!) aren’t using.
Tip Three: Practice Money Mindfulness
When we think about money, we tend to think in terms of the ‘doing’. Of spending, saving, budgeting and investing. Perhaps we don’t think much beyond that. We use money to “do” other things – buy things, generate wealth, provide care and show others how much we love them through gifts and treats; so often our focus is on the thing that we use money “to do”. Money is the “method”. The “result” is what we buy or what we can afford to enjoy, so that’s what we concentrate on.
As a financial coach, I encourage people to take a step back from the “doing” – step away from “how” you use your money. By focusing on the “how”, we overlook the “why”. Our “why” is, in simple terms, the reason that we do things – our justification for our spending, saving, and budgeting. It is the motivation we use to achieve our financial goals.
The key to achieving those goals is adopting a mindful approach to our spending – being consciously aware of our “why” in our decision-making.
I have a game that will help you re-find your “why”. The benefits of it are enormous, and it is very simple. Once you have assessed your spending against one of three categories, you challenge yourself to find the “why” of each expense. Once you’ve done that; you are able to question whether you are spending or saving, budgeting or investing, in alignment with, and in a way that moves you closer to your goals for your family.
In the Money Mindfulness Game, you will need: a copy of three months of bank or credit card statements (you can do it with less, or with up to 6, but most people will get a good indication over 3 months). You will also need a calculator, 3 highlighters and a pen and paper.
When you assess your statements, the aim is to categorise as many of your expenses on the statement as possible into one of three “types”. These are: conscious, mindful and intentional. Let me explain the different categories to you.
Conscious spending is our “foundation” – what most of us spend under the guise of everyday. It includes anything necessary for you to live – so include rent or mortgages, groceries, water bills, electricity etc. Within conscious spending we know we aren’t moving towards our family goals – these expenses are the things we need to pay to live our current life and to go to work or run our homes. Do not include “choice” expenses here, like TV packages or food delivery boxes – they should be included in the next category.
Mindful spending is the next “layer” in our money pyramid – once added up, this probably totals less than Conscious spending. These are all expenses that you are currently “choosing” to make each month to enjoy life. As I mentioned above, that might include a TV package, a National Trust Membership or Gym membership.
Finally, your last category is “Intentional Spending”. Of your transactions that are left, I want you to highlight those expenses where you have made them deliberately to move you closer to your family financial goals. Examples will depend on what your financial goals are – but could include: regular savings amounts, investment direct debits, paying for services or help, or the cost of school fees and tutors. Everything that you place into the Intentional category must be a proactive money decision that will help you on the path to achieving your goals as a family.
Once you have finished categorising, the real work begins. Look carefully at whatever you haven’t highlighted. Ask yourself why. Why did you spend that, what does it help you achieve? If the answer doesn’t leave you satisfied; if it doesn’t “fit” with your future and family values, then question it. Ask yourself whether it is helping you or hindering you in living the life that you want, in the way you want.
The same goes for your “Mindful” spending category. Remember, these are expenses that you are choosing to make each month to improve your current lifestyle. You aren’t aiming to “cut” every mindful expense, but to return to your “why”, and ask what the benefit of it really is.
In modern society we are often “rushed” – both physically and mentally; and that goes for our finances too. The way we buy, spend and save is designed to create a sense of urgency in our brains – to short-circuit “intentional” spending, to avoid us questioning the purchase or asking ourselves what our “why” is.
The truth is, in planning our family finances, the why is just as important as the how. The why reminds us to focus on our goals. It encourages us to keep “our family future” uppermost in our decisions, and it keeps us on track.
Your finances are the method that you have to be able to live the life that you want, and achieve your goals for your family. So it’s important that you always think about whether how you’re spending is really helping you to achieve those goals – or whether you’re simply spending because you think you should (spoiler – you never “should” – only if you WANT to!)
I hope that this article has been of use, and if you have any other tips that you use to help refresh your family finances, I would love to know!
Charlotte Lidstone, Money Communication Coach