With average credit card interest between 15 and 30 percent, paying for Christmas on plastic can be very costly. We consider how to avoid a debt hangover in January by starting to save early for next Christmas.

Christmas will always be an expensive time of year. During the month of December, most people increase their spending on going out and other entertainment, food for the family and of course gifts and presents.

But this increased level of spending can come with a high price. According to the insolvency service, in December 2010, 4 out of every 10 people still owed money which they had borrowed to fund Christmas in 2009.

Given that the majority of this spending was funded with credit cards charging interest of between 15-29 percent, paying on plastic is an expensive way to fund your Christmas. Far better not to rely on credit cards come December but use the money you have saved through the year. We offer some tips on how to achieve some saving by next Christmas.

Start saving early for Christmas

If you want to avoid expensive borrowing at Christmas, the only alternative for most people is to put aside some savings for use during December. However, to make this happen you need to start saving early.

It is no good thinking about starting a Christmas savings fund in October as the two months remaining before Christmas will simply not give you enough time to save the money you require.

To save any meaningful sum, you should start putting money into your Christmas savings fund in January.

Decide what you should save

Before you start saving, you need to decide what you can save. This will normally be a balance between the savings fund that you would like to end up with and what you can afford to put aside each month after your other expenses have been paid for.

Your first job is therefore to review your income and expenditure and decide what you can afford to save. You should use our Living Expenses Guide to help you with this.

If you deduct your essential living expenditures from your monthly income, you will be left with your disposable income. You can then decide how much of you disposable income you can save and how need for other things. I call this process planning to save.

Without having first carried out this planning process it is no good to simply decide to save and then try to start a savings plan. If you do not know how much you can afford to save, you will try to save more than you can afford. Then, even if you do save for a month or two, you will end up robbing your savings money to pay for your food shopping when things get tight.

Save at the start of the month

Because you have planned to save you know exactly what you can afford to save each month. You can now be comfortable to put this amount away as soon as you are paid your income as you know you can afford to do so.

Put the amount you want to save into a physically different account. That way your savings will be out of sight and out of mind and you will then be less likely to be tempted to spend them.

If you plan to save but wait until the end of the month, nine times out of ten the money will have already been spent.  At the back of your mind you will know it is available and during a moment of weakness in the month you will spend more than you planned.

Avoid the New Year debt hangover

If you do not save for Christmas, when your credit card bills start hitting the door mat in January, you will have a miserable month.

If you are not in a position to pay the balance straight away you will be forced to pay interest on the outstanding balance and before you know it, your December spending will suddenly become up to 30% more expensive. Very few people can afford this kind of uplift and no one wants to simply give the banks more of their money.

So instead of battling to pay off your credit cards start a savings plan in January for next Christmas. Using money you have saved and you know you can afford to spend will mean that the run up to Christmas and the following new year will be much merrier.