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Cut the cost of Christmas By Hannah Ricci
Spending a lot of money at Christmas seems inevitable. As well as buying gifts for family and friends, we fork out hundreds of pounds on food and drink, socialising and decorating our homes. Research from Britannia shows that we each spend an average Despite our promises to "plan ahead next year", Britannia found less than half of us save for Christmas and instead rely on credit cards and overdrafts, leading to a huge financial hangover come January. However, getting your head around how much you can spend now will help ensure you don't blow your budget during a frantic last-minute rush, while applying a few simple strategies can help you limit the financial damage. 1. Plan ahead If you're one of the 4.48 million people who, according to Sainsbury's Bank, always leave their shopping until Christmas Eve - when frustration leads you to recklessly part with your cash just to escape the chaos of the high street - you probably vow each year never to make the same mistake again. Leaving it until the last minute is bad for your bank balance as well as your blood pressure. So if you have lots of presents to buy, try to spread your spending over two or three pay packets to lessen the pressure, rather than relying solely on your December paycheck, which often comes early yet has to last longer into January. Write a list and a budget before you even think about hitting the shops, because without them your spending can soon escalate out of control. Consider how much you spent last year and ask yourself whether that was an affordable amount or you'd like to spend less. Break down your budget into categories, which might include gifts, a new outfit for the party season, food and booze. Create a gift list by writing down the people you'd like to buy for and put a price limit next to each name. If it adds up to more than your budget, review the limits you have set. 2. It's the thought that counts Once you have figured out how much you can afford, the biggest problem is what gifts to buy. The most lavish gifts aren't necessarily the most appreciated ones, so try not worry about spending lots on your loved ones - it really is the thought that counts, providing you do actually put some thought into it. Just guessing what someone might like is probably the biggest mistake you can make when buying presents. Instead, look at people's interests because that should immediately generate some ideas. Perhaps they like to cook, or enjoy gardening or travelling. Do they have a hobby or play a sport or instrument? What kind of music do they like? Are they a gadget geek? This will narrow down the options, but it's also worth listening to friends and family in the run-up to Christmas. In terms of socialising over the festive season, agree with friends and family to take it in turns to do the entertaining so you're not left to foot the bill every time. Be realistic with your big food shop - the shops are only closed for Christmas Day and Boxing Day, so there's no need to go overboard and stock up to feed the five thousand. 3. Avoid the Christmas chaos Providing you haven't left your Christmas shopping until the last minute, doing it online has a number of advantages. First, there are huge savings to be made, particularly on electrical items, books, DVDs and CDs, and you are likely to spend less because you won't be distracted by in-store marketing displays and so-called special offers. And the big attraction for many people of buying gifts online is of course that you can do so from the comfort of your home and don't need to set foot on the hectic high street. But before you buy check delivery times to ensure your goodies arrive in time. Many popular sites such as Amazon will do next-day deliveries, but this will be more expensive and could cancel out your saving. 4. Christmas on credit If ever there's a time to need to dip into your overdraft, it's likely to be in the run-up to Christmas when you'll be spending more than usual. However, while many people view overdrafts as an extension of their current account, they are a real debt that you need to pay back so it's important to find out how much using your overdraft will cost you. This should be detailed on your statements. A number of accounts offer interest-free overdrafts, but with others the rates can be as high as 18% to 19%, which would increase a £500 debt by up to £95. In addition to interest, banks levy penalty charges if you exceed your authorised overdraft limit, or if a cheque, direct debit or standing order bounces because there are insufficient funds in your account. These fees can be as high as £39, and can increase by up to £30 a month if you don't get back into your authorised overdraft. If you anticipate having to use your overdraft and the rate is high, it's probably not the best way to borrow money. A credit card could be a better option. However, again you will need to check the rate on your current credit card, because they can be as high as 28%. It's worth applying for a card that offers 0% on purchases so you can pay off the debt without any interest racking up. The best card for spending at the moment is the Halifax Purchase MasterCard, which offers 0% on purchases for 15 months, and 14.9% thereafter, with a 59-day interest-free period. When the bill arrives in January, try to pay back more than the minimum repayment, because figures from debt consultancy New Tomorrow show your gifts could eventually cost double the amount you paid for them. If you bought a Playstation 3 package for £424.99 on the new Egg credit card, for example, which offers 0% on purchases until October 2008 and 16.9% thereafter, with only the 2% minimum repayment made every month, the cost would jump to £842.03 with interest and would take 152 months to repay. 5. Swap stockings for sandals Around 75% of us would like to leave gloomy Britain for sunnier climes over the festive period, according to a survey by Kayak.co.uk. Jetting off somewhere hot - or wintery - doesn't have to be expensive, providing you don't leave it to the last minute and shop around for flights and accommodation. It's possible to make big savings on travelling to the Caribbean, which was the destination of choice among 46% of people in the Kayak survey. A return flight from London airports to Antigua between 17 and 31 December costs from £1,261 with Thomas Cook, while return fares were found for less than half the price, at £622, through a search with Kayak. New York is also a popular choice for Christmas city breaks, yet a package for 22 to 27 December from high-street travel agent Going Places, which includes return flights from London Gatwick to Newark and five nights accommodation costs from £1,439 a person. A quick search on Kayak.co.uk finds flights for the same dates from £374 and similar accommodation from £43 to £50 a person, per night. It's important to buy travel insurance before you jet off, because travelling without it could leave you high and dry should anything go wrong on your Christmas break. The insurance market is very competitive and you can buy cover from as little as £15 for a couple for a single seven-day break in Europe. Alternatively, if it's not going to be your only trip of the year, you could save money with an annual multi-trip plan. As with your flights and accommodation, avoid buying your insurance policy from high-street travel agents because they charge more for the same policy than if you buy direct from the insurer.
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