Avoid a Christmas Debt by budgeting

2.3 million people are still paying off Christmas Debt from last last year according to mystery shopping group Consumer Intelligence. Given that credit card interest can easily reach 30% using your card to pay for the festive season can be very expensive. We explain how you can minimise your Christmas debt by giving a little thought to what you can afford to spend and sticking to a budget.

Reduce Christmas Debt by setting a spending budget

By the middle of November you may start making a list of the people you want to buy presents for and what might be suitable. However by starting at this point you miss a vital part of the process – setting a budget.

Before you make your Christmas present list if you review your finances and fix what you can afford to spend you will be making a massive step towards avoiding  Christmas Debt

This amount you have available can be dictated in many ways. Perhaps you have been saving throughout the year or you know you will receive extra wages in December or a bonus in January. The most important thing is to set a budget you will be able to repay when your January credit card bill hits the mat.

How to make your Christmas shopping list

Once your budget is fixed you are ready to list the people you need presents for. But instead of immediately putting present ideas next to each name, first split your budget between each person.

The amount of money you allocate to each is of course up to you. However, once you have finished the total expenditure should not exceed the budget you have agreed with yourself. Now you know how much you will spend on each person you can choose presents which will fit within the budgets you have allocated.

Not only will this process help you avoid a Christmas debt problem. It will also make your Christmas present decision making much easier as immediately you can narrow down the options of what to buy each person on your list.

Pay off your credit card balances in the new year

Sticking to a spending budget will give you a great chance to avoid Christmas debt this year. But the final and most important step in the process will not happen until the New Year when all the festivities are over. In January you must pay off your credit card balance.

If you have stayed within your budget you should have the money to do this. However, the temptation to actually spend more in January is very high particularly with sales constantly being advertised.

It is important to keep to your plan and use the available money you have to pay off your Christmas expenditure. If you do not do this then it is likely that your debt will start running away from you. You may then end up having to use a debt management solution to recover the situation.