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The true cost of Christmas: most Brits won’t recover until April!

Multi-ethnic adult family celebrating with champagne, talking and dancing in the kitchen while preparing dinner on Christmas Day

With Christmas just days away, many Brits have already spent hundreds on presents, decorations, food and festive activities.

While spending a little extra at Christmas may be fun, the costs at this time of year can quickly add up! Consequently, more people find themselves in debt during December than at any other time of the year.

In response, debt management company Lowell has recently conducted research that takes a deeper look into the spending habits of Brits over Christmas.

The research shows that most Christmas spenders won’t recover their finances until April! Here’s everything you need to know about the true cost of overspending at Christmas.

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It takes four months to pay off Christmas debt!

The study by Lowell reveals that it takes around four months to recover from Christmas overspending. This means that you may not finish recovering your bank account until April.

During the Christmas period, the average Brit will spend around £2,500. This is 29% more than other months of the year and will place the average Brit in £439 of debt!

Pressure is the biggest cause of overspending at Christmas. As friends and family gather together, many people feel the need to show their generosity and buy more than is perhaps needed.

In fact, 22% of Brits say that they feel the pressure to overspend at Christmas, with 14% feeling the need to buy large expensive items. At this time of year, family and friends want to spoil their loved ones. As a result, 13% of Brits say that they fork out on expensive brands. Furthermore, social media pressure causes around 10% of Brits to spend more than is needed on festivities.

Where does the money come from?

Finding the extra funds to afford luxury gifts at Christmas time isn’t always easy. Subsequently, one in six people will turn to credit this Christmas. However, the number of Brits who plan to use credit is lower this year (17%) than it was last (26%).

Nevertheless, other causes of debt, such as pay as you go schemes, have increased during 2021. As well as this, 9% of Christmas shoppers will rely on their overdraft to fund their spending.

For those who don’t turn to credit or loans this Christmas, 39% will delve into their savings and only 35% will use disposable income to afford Christmas gifts. These figures have dropped since 2020 when 48% of people used savings or income that they could afford to spend.

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How to stop overspending at Christmas

While overspending at Christmas may seem unavoidable, here are three ways that you could avoid falling into heaps of debt!

1. Set a budget

Budgeting is common practice for most of the year, but it seems to get thrown out the window as soon as Christmas begins. A good way to avoid falling into debt is to make a Christmas spending plan and budget accordingly.

Ideally, this should be done before your Christmas shopping commences. However, it is never too late to start! With less than two weeks until the big day, now could be a great time to work out what you have spent so far and give yourself a budget for the remainder of the festive season.

Doing this could help you to avoid falling into debt that might not be paid off until April! Your future self will thank you for getting on top of your finances before it’s too late.

2. Show that you care without the added costs!

According to the survey, 22% of Brits say that they’re feeling pressure to overspend on gifts for family and friends this Christmas. However, there are many other ways that can show your loved ones that you care that won’t break the bank!

Some fantastic ways to treat your loved ones this Christmas include:

  • Baking some festive treats
  • Making handmade Christmas cards
  • Sentimental DIY Christmas gifts
  • Going out of your way to spend more time with loved ones this year

3. Shop for less

One of the biggest financial downfalls at Christmas is the temptation to buy luxury brands instead of cheaper alternatives. In truth, most luxury items are no different to their budget-friendly counterparts and cause Brits to spend way more money than is really needed.

Supermarkets are a great example of this. Switching to supermarket own-brand food instead of branded items can save consumers £1,200 per year! This means that huge savings could be made by purchasing own-brand products as part of your Christmas food shop. 

The post The true cost of Christmas: most Brits won’t recover until April! appeared first on The Motley Fool UK.

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