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In an ideal world, we’d all embark on our Christmas shopping with savings we’d carefully squirrelled away throughout the year. But in reality, competing financial priorities can leave many of us struggling to cover Christmas on top of regular expenses.
Higher interest rates and the rising cost of essentials have also made it harder to save money for a festive spending spree.
In 2023, research by Perkbox, a rewards and benefits platform, found that almost half (47%) of UK workers planned to borrow and go into debt to pay for their Christmas shopping. However, attitudes to Christmas spending are shifting: this year, over three-quarters (77%) of UK adults say they do not intend to go into debt to cover Christmas spending, according to NerdWallet UK’s latest debt survey.
If you’re determined to keep your Christmas spending in check this year, read on for the strategies personal finance experts recommend.
Why it’s harder to hold onto your cash at Christmas
Christmas hits the shops as early as August and we are bombarded with festive marketing on TV and social media. These messages can compound the pressure we feel from friends and family to gift generously, attend costly social events and spend beyond our means.
In particular, younger adults may be at greater risk of overstretching themselves financially over the festive season. More than a quarter (26%) of 18 to 24-year-olds we spoke to told us they are considering going into debt to cover Christmas costs, higher than any other age group.
The advent of new ways of borrowing, such as Buy Now Pay Later (BNPL) has made it quicker and easier for shoppers to split payments into smaller, interest-free instalments, often with minimal credit checks. For those with limited disposable income, BNPL can seem like a great solution to the problem of covering Christmas costs on top of regular bills and expenses.
However, while convenient, this ‘quick fix’ could backfire in the New Year if shoppers spend without planning how to clear their debt before the interest kicks in. The ease of BNPL can encourage impulsive spending, leading many to accumulate debt without realising the impact on their finances until later.
Starting the New Year with a backlog of BNPL debt or any other borrowing can lead to feelings of regret. Younger consumers (those aged 18 to 24) are more likely to feel guilty about their spending than older adults, our research found.
Five ways to keep Christmas spending under control
1. Carve up your Christmas budget
Without a clear picture of the money you have available, avoiding overspending at Christmas is guesswork, so building a budget or reviewing your existing one is a critical first step.
“Overspending happens when you don’t actually know how much you can afford to spend,” says Olamide Majekodunmi, founder of the website All Things Money, adding that expensive social activities in the lead-up to Christmas “make people feel like they need to spend more.”
Tip: Write down all your Christmas costs, including gifts, extra groceries, drinks with colleagues or nights out. Set a limit for each expense and consider whether cash stuffing – literally putting aside cash in envelopes – could help you stick to your budget. “[It’s] easy to spend willy-nilly when you’re just using Apple Pay, so having cash can help you restrict how much you’re actually spending,” says Majekodunmi.
If your bank offers an instant-access savings account or ‘pot’, this can be a useful way to allocate funds if you prefer not to use cash.
2. Plan for an early payday
If your December wages land in your account earlier than usual, factor this into your budget.
“People tend to get paid the week before Christmas, so that stretch from Christmas to the end of January is even longer than the average 31-day month,” explains financial coach Emma Gosling.
Tip: Work out how much you’ll need to cover your essential outgoings in January and set that money aside before running down your (temporarily inflated) bank balance on presents and parties. Moving the money into a separate account can reduce the temptation to dip into January’s rent, for example.
3. Stick to a pre-planned gift list
Sticking to a budget can be tricky if you’re a last-minute Christmas shopper or get swept up in the festive spirit. Making a list and setting a budget for each gift reduces the likelihood of purchasing more than you need or panic buying on Christmas Eve.
A list can also help you stay focused when confronted with deals and discounts. “When you go into a shop and get overexcited, you might see offers and start picking up deodorants, for example, when the person didn’t ask for deodorant,” explains Majekodunmi.
Tip: If you’re shopping online, remember to factor in the cost of postage into your budget. If you’ve already allocated a few extra pounds for the delivery charge, you’ll be less likely to fall into the trap of ‘spaving’ (adding extra items to your basket and spending more than planned to “save” the cost of postage).
4. Avoid Buy Now, Pay-Later if possible
When money is tight, Buy Now, Pay Later (BNPL) can feel like a great solution. But starting the New Year in debt could make it harder to hit your financial goals for 2025.
“You’ve got all these facilities at your disposal now to spend almost without thinking. We have to make sure that we’re not going to create a financial burden,” says Gosling, who finds many of the financial coaching calls she does in January “are all about how BNPL later is still hanging around,” which “tends to put a bit of a sour note on the start of the year.”
Tip: Only use high-interest borrowing tools if you’ve budgeted how to pay them off. Before making a BNPL purchase, calculate how long it would take to clear the debts, including any interest charged.
5. ‘Downshift’ on food
Christmas is often associated with luxury, but you can enjoy a fabulous feast by shopping at budget supermarkets or switching to own-brand alternatives. This strategy, called ‘downshifting’ or ‘trading down’, can help stretch your budget.
“Write a list of exactly what you need, because there’s nothing worse than throwing food away,” says Gosling, who encourages asking friends and family to chip in. “Maybe even get people to bring something with them. Everybody brings a dish to share, to take the pressure off you.”
Tip: Use a comparison website such as trolley.uk, LatestDeals.co.uk or MySupermarketCompare to compare the prices of products at different supermarkets. You can also check where your favourite products are in stock and look for special offers. For example, our Nerdy research on 27 November found:
- Roast potatoes: £3.25 at Waitrose or £1.50 at Sainsbury’s and Iceland
- Pigs in blankets: £4.45 for 8 at Ocado or £1.99 for 12 at Aldi
- Basted turkey crown: £25.00 at Waitrose or £9 special offer at Morrisons
However you plan to celebrate, remember that money isn’t what creates the magic of Christmas. “People will remember how you make them feel more than what you give them,” says Gosling. “Plan for get-togethers, plan for games and silliness and connection… that’s probably the most important thing you can do.”
Image source: Getty Images
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