Christmas is an expensive time of year with the cost of presents, food and entertaining, and according to MoneyHelper, a quarter of individuals are worried about going into debt as a result of the festivities this year.
The financial impact of the pandemic could also mean that people are struggling now, more than ever.
With this in mind, WEALTH at work has created their top ten tips for employers to share with their employees on how they can avoid debt this festive season and get a good start to their finances in 2022.
- Plan a budget – Employees should look at their bank statements to work out what they spent last year in the run up to Christmas. They might be surprised at what they find and clearly see areas where they’ve overspent and can cut back. They can then decide what they want to spend this Christmas and stick to it.
- Agree a price limit with friends and family – It is easy to get carried away at Christmas and spend more than is affordable. Employees may want to consider alternatives to spending on gifts, which other members of their family might actually be grateful for. Many families agree limits on the amount to be spent on each other in advance, with some agreeing to only buy gifts for the children, making gifts, or choosing to have a ‘day out’ as a family as an alternative.
- Multi-buy offers – Many shops have some great offers in the lead up to Christmas, with 3 for 2 and half price deals on toys and gifts. It is possible to save a lot of money by using these offers, however employees should always check that they are genuine savings.
- Shop around for food and drink – The Christmas food and drink shop could be the most expensive supermarket visit of the year, so it’s important to shop around. Some supermarket own brands have rave reviews and are a fraction of the price of the leading brands.
- Look for discounts – If an employee is buying something expensive, or are buying lots of things from the same place, it can be particularly beneficial to search for discounts. They may even find discount codes for online purchases. Many workplaces offer a range of discounts on travel, high street vouchers, gift cards, cinema tickets, days out and leisure activities that could be used to purchase as a gift for someone.
- Check interest free deals – Some companies and credit cards offer 0% interest finance deals, meaning money can be borrowed interest free for a period of time. However this debt must still be repaid and although incentives like these can be attractive when buying gifts for Christmas, employees should ensure they have paid off the debt before the deal ends to avoid high rates of interest.
- Beware of pay day loan companies – If an employee really does need to borrow money this Christmas, it is best to avoid pay day loans as they are a very expensive way to borrow. They are only meant to be short term loans, so shouldn’t be touched unless they can be paid back on time, as the interest can spiral out of control. Employees who have already taken out a high interest loan like this, should speak to the Citizens Advice Bureau to find out what options are available to them.
- Plan to pay off debt as soon as possible – For those who do find themselves getting into debt, they should make sure they pay it off as soon as they can. For example, according to MoneyHelper if someone borrowed £2,000 on a 19% APR and only paid the minimum payment every month, it would take them 24 years and two months to repay it and £4,731 would be paid back in total. The total interest that would have to be repaid would be a shocking £2,731! A good option could be to consolidate any debts into a 0% or low interest balance transfer card, as more money will go towards paying the debt off and enable it to be cleared over a shorter time period. These transfers typically involve a transfer fee so this fee would need to be factored in before transferring any debt. Whatever method is chosen, it’s always best to make paying off debt a priority.
- Look for ways to save money – It is possible for employees to make significant savings on a range of household bills such insurance providers and broadband and mobile providers. Price comparison websites make it easy to compare the different deals available. Increases in wholesale energy costs mean fewer deals are available right now, so it may not be a good time to try to change utility suppliers, but there are still significant savings available on other bills and every penny saved can be put aside to help pay for Christmas.
- Plan early for next year – In January, there are often some great deals on things needed in preparation for Christmas 2022. Employees should keep an eye out for special offers and store them away for next year, but should make sure they remember they have them!
Jonathan Watts-Lay, Director, WEALTH at work, a leading financial wellbeing and retirement specialist, comments;
“The last thing employers want is for their employees to suffer the effects of poor money management, through for example overspending at Christmas, struggling to make the monthly budget work, or even failing to prepare for major life events such as retirement.”
He adds; “Employers are now increasingly putting in place financial education seminars and digital support to help improve their employees’ financial wellbeing, with topics ranging from managing debt, improving credit scores and general money management, through to saving for retirement. This can really help employees to feel secure about their finances, and in turn, lead to a confident and financially empowered workforce.”