Here we are at session number 40 , and we’re going to be talking about How to survive Christmas with your finances intact. Theres probably no greater challenge to your budgeting and money management discipline than the Christmas splurge. But you don’t have to spend the rest of the year paying off the December Damage.

In this session I’m going to tell you everything you need to know and everything you need to do to get it right. Even if this year you’ve gone off the rails a bit, you’ll be well armed for next year.

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[UPDATE] See the comment by AndyN in the comments section under the post for a great link about how to stay safe online this Chrsitmas,

After the main body of the show I’ll be announcing the winner of last week’s review competition and asking for your help in a future session.

Before we dive in…

Sponsor Message

This podcast is brought to you with the help of Seven Investment Management, a firm of investment managers based in London. They put their name to my show and to my site and videos because they believe in what I’m doing, and I’m very grateful for their support. You can see what they’re up to at 7im.co.uk

Everything you need to KNOW

There’s just one thing you have to know about Christmas. Knowing and understanding this one thing means that all the excuses for financial ill-discipline go out of the window.

When I tell you what it is, you’re going to want to throw things at the iPod/car stereo/computer/whatever a shout about what a sanctimonious git I am.

Are you ready?

Christmas comes at the same time every year

And the prize for stating the bleedin’ obvious goes to…

Seriously, think about it. If something happens at the same time every year you can….say it with me….PLAN FOR IT! Christmas doesn’t sneak up on you. It doesn’t like to mix things up and drop on you in June. And because of that you can put in place all the things necessary to guarantee that you come out of it in January in good financial shape, and not dreading the whump of a massive credit card bill landing on your doormat.

Here are some more obvious points:

– There are twelve paydays between each Christmas season, or 52 if you’re paid weekly. Or if you work for McDonald’s and are paid fortnightly, that’s 26. (Maths was always my strong point). That’s twelve opportunities to put some money towards Christmas, so that it doesn’t all have to come out of your November pay packet.

– Christmas doesn’t change all that much from year to year. Probably the family look much the same as they did last year, unfortunately. That means that their needs and wants are much the same, and unless granddad has a new girlfriend who only eats stuff from Waitrose, it’ll all probably cost much the same as it did last year too.

– No-one else sets the limits for how much you spend at Christmas, you do. I know it can be a time of pressure. Kids want iPads. Family want to come over and eat you out of house and home. But your financial wellbeing is more important than the temporary needs of all these.

You know all this makes sense. Christmas is largely predictable. So with that in mind, what can you do to make it as financially straightforward as possible, if not this year, then definitely for next year?

Everything you need to DO 

Having stated the obvious in a few different ways , what are the practical steps you can take to apply this knowledge and ensure that your finances stay on track this Christmas?

1 – Set a budget for Christmas, and stick to it

Christmas can be a big expense. Like any expense though, it is possible to plan for it and be better prepared than perhaps you have been in the past. In that regard, it’s the same as, say, your holiday. You have a fixed cost (well, maybe a bit variable depending on the level of Sangria consumption) and you have to find the money to meet that cost, either by saving up or by paying off the credit card.

The key to all budgeting, as you know by now if you’ve been listening for a while, is to tell your money how much of it is going to be spent this Christmas. Set a budget and stick to it. Look back at last year. How much did you spend last year. If you spent much of this year paying for it, then you might want to spend less this coming Christmas.

Once you have a budget in place, let’s say it is £750, you can allocate how much of this is going to be spent on what items. Say £100 for Jonny’s pressies and £100 for Tina’s. Then you have the Turkey to buy, or the cost of Christmas lunch at the pub. That leaves about £500 for booze, right?! Factor in everything and treat it as a mini budget, then do everything in your power to stick to the budgets for each line.

If you save money on, say a two for one deal on Liebfraumilch, then that might free up some money to spend on stocking fillers for Jonny & Tina, or on some new fairy lights to replace the current ones where only every third bulb works, and then only if it feels like it.

You might think that this is all a bit Scrooge-like and Bah Humbug, but who said you had to throw all caution to the wind at Christmas? In fact, having limits which you stick to can be liberating and allow you to enjoy the Christmas season even more, knowing that you’re going to be in fine financial fettle come January.

2 – Put the money aside each month to reach your goal

Let’s say your budget for Christmas is £750. If you divide that into eleven pay packets between January and November, that’s £68.18 per month. Put this amount into a separate bank account or account for it in your budgeting system. When it comes to November and you’re starting to think about presents, the money is there to pay for them.

I can’t tell you how liberating that is. There’s no sick feeling as you add it to your credit card balance, instead you can just draw it from your own credit balance and, as you go along, you know how much you have got left in the pot.

For years now we have been putting away £100 per month, on the day I get paid, so that we can have a cracking Christmas with no January hangover. You can have a cracking Chrimble on half that, a third of that, easily. But we love Christmas so we choose to spend that much on it – its’ an intentional thing. Every family is different, and you know better than I do what you can afford to put away.

There are other ways to save on the drip too. Most supermarkets have savings schemes where if you spend more than, say, £40 each week on shopping, they’ll give you a £5 voucher towards your Christmas shop up to a maximum of £50. That’s a lot of money so make use of these things.

Be wary of Christmas Clubs. These are savings schemes whereby you can save a little each week or each month and then get access to your money in December to spend on Christmas. Usually, there is no interest payable on the money in the meantime, and actually, you often don’t get access to your money. Instead, you get a catalogue from which you can make purchases up to the value of the amount saved.

Generally speaking these should be avoided. The collapse of the Farepak scheme back in 2006 has led to better self-regulation of the Christmas Club industry, but for the most part, you would be better off putting the money into a jar in your house – at least you have freedom to spend where you want.

I suggest that actually, you use an instant-access savings account. If you have other savings in this account, use a spreadsheet or a piece of paper to put the balance into virtual pots. So if you have £5,640 in there, and the £5,000 is your emergency fund and the £640 is for Christmas, make sure that’s written down somewhere so that you don’t dip into your emergency fund by mistake. Or you can just have multiple accounts and have one just for Christmas. This is what I do and it works really well.

Whatever the mechanics of how you save, just do it, you won’t regret it.

Now, if you have already put most of Christmas 2013 on your credit card, you’re going to need to pay that off as well as put money aside to avoid doing the same thing next year. Listen to Session 4 about getting out of debt and apply those lessons, sharpish. It’s going to take work, but will be worth it.

3 – Compare prices and maybe wait for the sales?

Now, I’m not suggesting that you make Jonny wait for his train set until the January sales, that might be a little bit tight and you don’t want to mentally scar the kid at this early stage.

But maybe between partners, or between you and other family members, you could agree that you’ll wait till Boxing Day or the 27^th and go shopping then. You can choose some stocking fillers to keep things going, but you may well be able to buy more or spend less buying the same item by just waiting a few more days.

Remember also that sales happen throughout the year. My wife is superb at always thinking ahead towards Christmas, even when it is only May. So when there’s an Easter Sale on at the lively gift shop in town, you might want to have a mind to your Christmas shopping. You’ll be three or four months into your savings plan by then and so there’ll be some money available.

If you do spend some money on Christmas before it gets to November, make sure to deduct that money from the running total in the savings account, so you know what’s left to spend out of the total budget.

Comparing prices is so easy now, I’ve no idea how we used to do it. I suppose we didn’t have to do it so much, if there was only one or two shops in the area selling what we wanted to buy. Now that there are a million different places to buy the Monsters University DVD, you can shop around to find the cheapest price.

Some of you are thinking – Really? Do you really shop around to save three quid here and there? The answer is yes. We just saved £4 on the Monsters University DVD by getting it on a Black Friday deal on Amazon. If I save that on each of the three copies that I bought for my extended family, that’s £12. Do that a few times and you’ve saved £50 or more, which has to be worth doing. Look after the pennies, as your grandmother’s grandmother used to say, and the pounds will look after themselves.

4 – Look for cashback deals like QuidCo and voucher sites

Cashback sites are another phenomenon of the internet age. It is now possible to buy things through links on sites like QuidCo and TopCashBack and earn cash back, just by adding in a couple more clicks to the experience.

These sites work because they generate commission from the retailers for referring sales, and they pass on some or all of this commission to the site members in the form of cashback. We have used these and generally had a good experience, so check them out. Look for one which pays you direct to your bank account, and doesn’t require you to set up a PayPal account or similar.

Voucher sites are also very popular, with good reason. Sites like VoucherCodes or MyVoucherCodes scour the internet for vouchers codes being offered by online retailers. Again, they make a commission for introducing the sale so they win, and you pay less.

Make sure that is actually the case though. You need to factor in the cash back when working out which site is the cheapest to buy the item from. Use your common sense and remember that no-one does anything for nothing. The sites you use will always be making a turn on the deal – just make sure you look out for number one and that you get the best deal of all.

5 – If you do have debts, shift them to a zero percent credit card

Credit Cards and store cards are generally very high-interest ways to borrow money. If you have built up balances on these this Christmas, you’ll need to shift them to a zero percent credit card in order to limit the damage and pay them off quickly.

There are fewer of these deals available now than there were, but they are still out there. You can get credit cards with no interest to pay for up to 17 months. There is always an admin fee to pay to shift the money across – this is like paying interest up front, but even so it’s likely to be 3 or 4% at most, a darn sight cheaper than paying interest at 20-odd percent on a store card.

There are even zero percent deals available to those with poor credit ratings, so do look out for them.

Much as it pains me to do this, Martin Lewis has a good run-down of the current deals – there’s a link in the shownotes.

This way, you’re paying down pure debt each month, rather than interest which makes the hole thing take longer. Wouldn’t it be great if you could do this and still save for Christmas next year?

6 – Spend every penny of the budget you have set.

My final suggesting is that once you have set a budget for Chrimble, and as long as that budget is affordable to you without resorting to debt, you should spend every penny of that budget on having the best time possible, Listen back to Session 32 on the Three Uses of Money, you’ll hear that one of those uses is for spending on having fun.

I can think of no better use for your hard-earned cash than having a cracking blow-out this Christmas. That’s what we intend to do, all assuming we’re in our house by then!

Don’t let a single penny of that budget go to waste. If you have few quid left, buy one of those massive Toblerones and enjoy it on New Year’s Day.

Whatever you do, make it a great time for you and your family. Life is precious. Money is not. Money is there to enable you to live a great life, that’s all.

Summary

So there’s a few things there which should enable you to have a great Christmas without sacrificing your finances for it. I hope you have a fantastic time and are able to fully enjoy it with those precious to you.

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OK, now I”m going to look at this week’s reviews, and announce the winner of the competition last week and I’m yogin to tell you what next week’s session will be about – so don’t turn this podcast off yet – there’s much more good stuff to come.

This week’s reviews

Three reviews have been published since last week’s episode and as you may remember the one who got in first wins a £50 iTunes or Google Play voucher as a thank you from me. I’ll highlight that one last of these three.

The first one who was pipped at the post was Norwich Neil, who wrote:

“Fantastic set of podcasts covering a wide range of financial topics. Pete delivers each podcast in a fun and informative way. They have really helped me get my financial house in order for which I am grateful. Keep up the good work pete – looking forward to the next instalment.”

Thank you Neil; it’s great to hear that you have taken action as a result of the message here – more power to ya! The benefits you’ll reap from doing so will be far more valuable than any voucher!

Next close runner up is Dom@AquaTackler:

“Really enjoy this podcast, very informative and really clearly explained for an investing newbie like myself.”

Thank you Dom – I’m glad you’re finding the content accessible. As a newbie investor, you’re going to love next week’s session – more in a minute.

But the winner of the competition is, wait for it….Furrybums! Yes, you heard me correctly, that’s Furrybums, who deserves to get the prize for having the best username ever. He or she writes:

“Brilliant podcast. Very informative, with a presenter who can make even the dullest subject interesting (the insurance episode). Well worth a listen, even for a seasoned investor.”

Congratulations Furrybums! You need to email me at so I can get your prize to you!

Prizes or no, if you can find the time to leave me a review on iTunes I’d really appreciate it. I hit an all-time high of number 7 on the Business section of the UK iTunes library this week thanks to your reviews. This keeps me front and centre in the lists and helps others to find me and subscribe.

Leave me a review at meaningfulmoney.tv/iTunes – and I’ll love you forever.

Next session announcement

Next time we'll be talking about how to put together an investment portfolio. I’m really excited about this one as it is a session I’ve been asked to do many many times. If you’re starting from scratch, ow on earth do you know what to invest in. Sure, you should take out a pension or an ISA, but what do you invest IN? Shares, bonds – what? I’ll be answering that question next Wednesday, which will be the last session until the New Year. Maybe you could invite your friends over for mulled wine and listen to the show together – what a festive thing to do that would be!

Not really. If that sounded like a good idea to you, you may not have many friends.

If you have some questions about this, I’d love to hear them and the best way to do that is to head over to the site and leave me a voicemail. Go to meaningfulmoney.tv/feedback and follow the instructions there.

Early in the New Year I’m going to be doing a show where I answer listener questions, and that’s it. Assuming of course I get enough questions! So think about what you might want to ask me and leave me a voicemail – again, it’s at meaningfulmoney.tv/feedback

Outro

That's it for this session of the MM podcast, I hope it was helpful. Did I miss anything? Do you have any questions or comments? The place to leave them is below

I hope you enjoyed this session. Thanks again for favouring me with your time – I'll talk to you next time