There's no doubt 2016 was a year packed with tumultuous surprise and instability - with Christmas being no exception to the rule. It is approximated that we collectively spent an astonishing £21 billion on Christmas last year and, including everything from exciting presents to parties and decadent Christmas nibbles, it's certainly a time of expectant excess. We eat too much, we celebrate a little too profusely and we definitely spend a lot more than we should – and sometimes without the necessary means to do so. This can result in a time not just of joy and merriment but extreme stress and concern over savings, current cash flow and debt.
Debt Figures and Statistics
Governor of the Bank of England, Mark Carney has already warned about high debt levels within British households after it emerged in November 2016 that credit card debt had reached beyond record levels (a rumoured excess of £572 million) and there's no doubt that yuletide spending has exasperated the issue.
Consequently, price comparison website uSwitch recently reported that 9 in 10 people with credit card debt (85%) will suffer in 2017 after consumers put almost £11 billion on their credit cards in order to fund Christmas last year. In fact, it has been stated that the majority of Christmas presents last year were purchased using plastic - averaging at around 76% of all purchases.
Subsequently, each individual is thought to hold an average debt of £636 and many (52%) feel that they will not be able to repay what they owe until Christmas 2017. What's more, considering almost 8 million Brits are still bearing the burden of past Christmas debts, it's likely the cycle will continue to worsen.
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Why Do We Spend So Much?
It's thought the festive season drove almost a fifth (19%) of consumers to overspend and it's clear from data collated that we have reason to be concerned. An extremely pressurised time for many, yuletide spending can take an unbearable toll on our finances that is difficult to fix, with 1 in 10 consumers even going as far as stating that they can't imagine ever becoming fully debt free.
When asked why they were willing to take on more debt year on year, 1 in 4 people said that it's simply the spirit of Christmas – claiming it was too important an occasion to cut down on or miss out altogether. Comparably, 30% said their total spend was due to Christmas being much more expensive overall last year; while 18% said it was simply "expected" and, when pressed, 9.1% candidly expressed that their Christmas spend is heightened due to fierce competition from family and friends.
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What Do We Spend Our Money On?
Research dictates that each household spends an approximate £700 on festivities, consisting of:
- An anticipated average outlay of £378 for presents per household, including 14 individual gifts for friends, family, colleagues and loved ones.
- Individuals will spend an average of £117 on presents for a partner, £145 on presents for children and up to £20 for a pet-friendly gift!
- Plus, it is thought we spend £183 on food and drink, £109 on parties and up to £83 on a new artificial Christmas tree, festive decorations and other expenses like the panto.
OnBuy decided to look into the average debt accumulated over the Christmas period in 2016, analysing data provided by AXA Insurance. Their report revealed the cities in the UK with the largest debt. We decided to correspond their debt, against how long it is estimated to re-pay. The results were extremely interesting as despite Brighton racking up the largest debt overall, they were one of the best for repaying their debt.
Top 10 Cities with the Worst Festive Debts (Figures Per Person):
The same survey revealed that on average only shoppers in Sheffield pay their credit card bills in less than four weeks and in some areas, the average period it takes to repay is more than six weeks.
However, these figures are dependent on circumstance. For example, it is thought families will have more trouble repaying debt due to having more people to buy for. In fact, the survey from AXA found that while the average Brit will take 4.8 weeks to pay back festive debts, this will rise to an approximate 5.5 weeks for those who spend most of their money on presents for the kids. (You can also read about the surprising trend of people spending more money on their pets than their friends!)
However, there is no mistaking that many people, part of a family or otherwise, will suffer financial difficulty and may not be able to pay anything at all toward their debt for many months; maybe even years in extreme or unfortunate cases. Troublingly, two thirds (65%) of people claim to be concerned about their level of debt and as many as 1 in 6 (17%) report that their worries are extreme.
Continually, The National Debtline charity has claimed that more than 5 million people in the UK regularly worry about their money in the run-up to Christmas and fittingly, debt charities and organisations across the board anticipated more than 2,400 concerned calls per day over December 2016. In addition, this month Citizens Advice claimed that they are expecting to hear from a total of more than 370,000 people who are concerned regarding their mounting debts and other financial issues.
So, with this in mind, what steps and measures can we take to think smart about our money?
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Top Tips to Manage Credit Card Payments
Don't ignore bills! As soon as a statement arrives, acknowledge it and take steps to tackle it. Otherwise you are at risk of gaining interest, which will be added to your outstanding balance.
Don't Just Make the Minimum Repayment
If your debt is spread across numerous cards, make sure to pay off your most expensive card first. Card issuers will add interest to any outstanding balance, so the longer you take to repay the more you will owe.
Switch Your Credit Card
Evaluate technicalities like your current interest rate and consider transferring to a card better suited to you. However, make sure to diarise when the introductory period ends so that you can avoid paying interest on outstanding debt. Typically, you will pay a balance transfer fee for moving debt - which is calculated as a percentage of the debt you're transferring onto the new card - and this will vary depending on the card you choose.
Avoid Missed Payment Fees
Card issuers may charge up to £12 for a missed payment, so avoid using your credit card as a cash card. Additional charges can vary from £1.50-5.00 and can make this an expensive way to borrow money.
How to Start Defeating Your Debt
Take a deep breath, sit down and assess your situation. Acknowledging a reason for your debt will allow you to realise where you have been going wrong and will help to effect change moving forward. Evaluate what you earn against what you spend and think about how you can establish a healthy relationship between the two.
Suffering with debt can often be an isolating experience, certain to fill you with dread, particularly if you feel like you have to keep it hidden from loved ones. Indeed, problems that are hidden may begin to gain a power of their own. Sharing your burden will help to alleviate concern and may offer you an avenue through which to gain help and support.
Form an Action Plan
It is important to note that everyone's situation is personal to them and there is never a one-size-fits-all solution. Each individual will tackle their debt differently – likewise, the reasoning behind each individual debt will differ too. It is important therefore to assess your action-plan thoroughly – tailor it to your needs and your needs only.
For some, a simple yet structured budget will suffice; while others will have no choice but to seek professional help. Free debt advice is available from charities like StepChange and The National Debtline, should you need to seek professional guidance. For purposes of this study, a spokesperson from StepChange had this to say:
"... January is always our busiest time. If someone is struggling with debt, it's important that they first write down everything they owe and to whom. Next, they should look at everything they have coming in and going out and draw up a realistic budget that they're able to keep to. Lastly, we would urge anyone who is worried about their debts to take free, independent debt advice as soon as they can."
Start off small and stick to your action-plan as best you can. If you remain consistent, you will begin to build a smart money routine that ensures your debt doesn't drift further into the red and little by little, you will make a difference. If you do need to shop, why not try cutting down on frivolous buys and perhaps try using a price comparison site such as OnBuy.com to compare all the best deals available.
Remember, if you're successful in paying off your debt, don't simply fall back into bad habits. Use the amount you've placed away each month to clear your debt and transform it into valuable savings. When next Christmas does roll around, you will be in a much better positon!
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