For many people, Christmas is undoubtedly a time of year with unprecedented pressure on family finances. There is so much to consider at this time of year - from presents to food, through to social events and trips for the kids. What should we prioritise - and how much should we realistically spend?
As ever, it is hard to give a definitive answer. What holds true for one family circumstance will likely be very different for another family. And, ultimately, it is up to each family to make a decision themselves about how important it is to have a perfect Christmas, or whether it is an area that sacrifices can be made. One thing that is consistently true, however, is that every family and individual should understand the financial implications of Christmas. How much are you spending - and do you have a plan for covering these expenses, or is it adding to an unbudgeted debt situation? Clearly the latter circumstance is what we are all seeking to avoid.
Like every other event, it is essential that we capture all of the costs associated with Christmas. It is easy to think of the big ticket items - the presents and the Christmas dinner for example - but how about the other bits of spending that might otherwise go unchecked? The visit to Father Christmas with the children. The work party where the first two drinks are free, but you have to pay after that. The little gifts that you buy for your children's teacher or for your neighbour who puts the bins out for you. The secret santa. The list goes on and on. And, of course, it adds up. It is essential to get a handle on the total cost of Christmas - and how it compares to a normal month. If you always go out for drinks with work, then the Christmas party might not actually be a significant additional expense. But if it is a very rare treat then it needs to be budgeted for.
Every family and individual should understand the financial implications of Christmas. How much are you spending - and do you have a plan for covering these expenses, or is it adding to an unbudgeted debt situation? Clearly the latter circumstance is what we are all seeking to avoid..
As previously stated, every family is different and it is hard to give a defined answer of what you should spend. But it is possible to give some guidelines, that are proportional to your household income. The following provides a starting point - but it is essential that you adapt it your own circumstances and preferences. Most importantly, how important is Christmas to you? If it is the most important event of the year and everything else (birthdays, holidays, occasional treats etc.) take second place then you may wish to be more generous. Alternatively, you may decide that the suggestions below are already too generous and you would look to pay less. This is great and should be encouraged wherever possible. It is ultimately always your decision!
In terms of presents, a good place to start is one percent (1%) of the family or household income. This should be calculated net (i.e. once tax and other costs have been deducted). So a family with £30,000 of post tax income would look to spend £300 on presents. A family with £70,000 of post tax income would look to spend £700. Clearly it is unlikely that any family will be able to afford this from a single pay cheque. This is why it is essential that Christmas presents are considered as a savings pot in a tool like iBudge, so that you can save throughout the year to cover the costs.
The cost of Christmas food is best considered as a comparison to your normal food shop. It will also vary based on whether you drink alcohol - and whether the consumption is likely to increase at Christmas. Of course, it will also vary if you are hosting lots of family and friends (although it is entirely appropriate to ask for a contribution if you are struggling to make ends meet). Generally speaking, it is likely that you will spend between one and a half (×1.5) and twice (×2) of your normal weekly shop in the week of Christmas itself. It's typically not just the increased cost of Christmas dinner, but the accompanying snacks and treats (maybe a slightly different breakfast etc.) that all add up. You will likely find that you spend slightly more in the week(s) before Christmas as well - and don't forget that New Year falls in the week after Christmas, so consider whether you will spend more for this event as well. As ever, the key consideration is whether you have budgeted for it or not.
The absolute truth is that the fun and memories of Christmas come from spending time together, laughing, playing games and relaxing. Few people will remember exactly what present they received (or what they ate or drank) as they look back on memories of years gone by.
The additional costs are harder to capture - and will be very dependent on your own unique circumstances. If you have children then you are likely to incur addditional costs, but these can be controlled and adapted as necessary. Trips to see Father Christmas really do vary in price - from a low key event in the local shopping centre through to a steam train ride or even a trip to Lapland. Any attempt to give a guidance on price is going to be hard - except to say you shouldn't incur debt unnecessarily for this. Kids will find magic in Christmas regardless - it doesn't need a huge amount of expense to make it happen. Similarly with events for yourself (Christmas parties or meals with friends etc.) make a judgement about how much you can afford - and don't feel afraid to suggest a cheaper option. It doesn't need cocktails and prosecco in an expensive bar if you have a bit of creativity. An event hosted at home - or even in the office if a bit of effort is made - is likely to work out a great deal cheaper.
It is hard (but most likely not impossible) to celebrate Christmas without spending a bit of money. But we recognise that many families and households are facing unprecedented financial pressure currently. The absolute truth is that the fun and memories of Christmas come from spending time together, laughing, playing games and relaxing. Few people will remember exactly what present they received (or what they ate or drank) as they look back on memories of years gone by. So we encourage you not to overspend - but find a way to have a great (and fully budgeted) Christmas!