UK retail sales are forecast to reach £84.9bn over the six week Christmas period this year, but why do we spend so much at Christmas?
Christmas Overspending
Vouchercodes.co.uk found that 20.5% will be using their savings to help pay for Christmas this year, compared to 19.6% of people last year. However, it’s not just savings people are using… many people this year will be looking to fund Christmas with credit options:
- 18.1% of consumers are using credit cards this Christmas
- 7.7% will turn to Buy-Now-Pay-Later schemes
- 4% will use a general loan
- 2.9% will use a payday loan
- 3.2% will turn to family or friends for a loan
Dangers of Funding Christmas by Credit
As soon as you start using credit to fund your Christmas gift giving, you are entering dangerous waters, as you are spending money you don’t have.
Buy-Now-Pay-Later (BNPL) financing for example encourages overspending, as you are buying things with money you don’t have at this moment in time. When we pay for things upfront, we can see the money exit our bank account and can view our new bank balance. However, when we use BNPL, the money doesn’t exit our bank account straight away, which makes it really easy for our spending to run away from us as we can’t keep our eye on it the same way.
As for loans, particularly payday loans, we will often have to pay quite a lot in the way of interest. This means that over time, you may end up paying back far more than you originally borrowed, which can put a big strain on your finances. You can use Stepchange’s free payday loan calculator to see how much money you would have to pay back with your loan.
You should also be wary of borrowing money off family or friends to help pay for Christmas, as if you fail to pay it back on time, it could certainly create tensions and lead to strained relationships.
Why do we Spend so Much at Christmas?
The Bank of England found that, on average, we spend almost £740 in December, which is 29% more than we would spend in a typical month. Why is this?
For many of us, Christmas feels like a special time of year, regardless of our religious beliefs. Some of our fondest memories are often rooted around Christmas and spending time with our family or other loved ones. Perhaps then why so many of us are so willing to squeeze our finances to much at Christmas is because we want to make it special for those around us too.
Many parents in particular feel a sense of pressure around Christmas to give their children ‘the best,’ whether that be the latest gadget, the newest toy, or the biggest pile of presents. However, what matters most is being there for your children as that is what they will remember most as they get older. At the end of the day, it’s the thought that counts, not the price tag.
There are additional factors at play here too, the first of which is social pressures. Often, we present ourselves to people in the way we wish them to see us. Therefore, it can be easy to fall into the trap of spending beyond our means in order to present a certain image of ourselves: an image of stability and success. This pressure has only been worsened by social media, as seeing others present their lives in a particular way online can often make us wish for the same. Click here to read more about how social media can pressure us to overspend.
This social pressure is often linked with a sense of pride, where we feel that we must ‘keep up appearances’ to outsiders or to family or friends. This can lead to use buying gifts that are too expensive and that we cannot reasonably afford.
Additionally, there are advertisements EVERYWHERE, constantly encouraging us to spend more and more money. Pre-holiday deals like Black Friday often seem too good to miss, leading to us buying things we wouldn’t have otherwise bought, racking up our spends.
Lastly, many of us fail to effectively budget for Christmas. Sure, you might make a budget, but do you stick to it? Our budget calculator is a handy tool to help get you started on planning your spending coming up to Christmas. Click here to use it for free!