How to set and manage a realistic budget this Christmas?

Make a list, and check it twice.

That's the advice for cutting costs and prioritising spending on your Christmas shopping this year.

The festive season is fast approaching, a time for goodwill and spending time with family and friends.

But it can also be a time for financial stress.

While prudent shoppers may have put a savings plan in place earlier this year, others may be starting to panic.

But it's not too late to start getting a budget in place now.

So, what is a realistic budget for Christmas?

There is no simple one rule fits all.

The Four Categories of Christmas

The idea of spending 1% or 2% of your income might not work for everyone, and there’s no set figure to aim for as individual’s disposable incomes can vary dramatically.

Instead, you need to assess your costs, see where you can cut any, decide on what you need and what you want this year.

John Lowe, founder of MoneyDoctors.ie, has broken spending down into four main categories; Presents, Decorations, Food and Drink, and Entertainment.

"You’ve got to set aside a certain amount of money for presents, how much are you going to spend on your partner or your children," he said.

"I’m a great believer in Kris Kindle. Its great if you have a large family or get to an age where you know you have to buy 10 presents, you are suddenly down to one and can set a budget for €25 or €30 and you’ve a draw for which sibling (or friend) you get."

"It’s a good way of doing it and means everyone gets a present."

Decorations, or the 'tinsel budget’ according to Mr Lowe, is the second category to consider.

While some decorations come out year after year, others like a real tree or new and eco-friendly trimmings might need to be purchased to make your home more festive.

The third category is food and drink.

"People think the end of the world is coming, they store up huge amounts of food and drink not realising shops will open again the day after Christmas," Mr Lowe said.

"That’s a huge amount of money. With the inflation and the cost of living crisis this year, the cost of food and drink has exponentially increased."

To make some savings on Christmas groceries, Mr Lowe suggests making a list and sticking to it, and if you haven’t got it don’t spend it.

"Santa made a list and he checked it twice, so why can't you?" he asked.

"If it's your Christmas shopping list, look in the pantry, look in the fridge, don't buy something you've already got."

"Don't shop on an empty stomach. Bring discount vouchers and look for bargains when you get to the supermarket.

"Read newspapers to find out where the best deals are currently and shop around, do all those practical and really important things because every cent counts."

Last but not least on Mr Lowe’s Christmas checklist is entertainment.

"At Christmas, people go to pantomimes and you know funfairs and various other things that costs money," he said.

"If you put all those together and you've got a lump sum of money that you’ve got to find from somewhere, and that's where the fun starts."

Mr Lowe advises there are options if you don’t have a saving plan in place such as credit cards, overdrafts and 12 month loans.

But he warns if people are going to borrow, they need to find out the interest rate and negotiate to get the cheapest rate possible to avoid credit pitfalls.

"The dangers are that if you put it on your credit card, come January you won’t have enough money to pay it off," he said.

"Then the problem with paying off the minimum amount and continuing to pay the minimum amount every month, it will take you 20 years, no matter what the balance is, to pay off that card."

Mr Lowe recommends transferring a credit card balance to a bank or post office loan account with 0% interest and pay it off gradually.

"We are seeing an improvement in consumer sentiment, there's definitely a more stable consumer mood."

The Credit Union

There are 3.25 million members of the Credit Union in the Republic of Ireland and there are over 400 physical locations.

David Malone, CEO of the Irish League of Credit Unions recommends small 12 month loans if you do need to borrow and to be wary of credit cards if you can’t pay them off.

"The interest applied on the credit cards can range anywhere, our latest stats show, from 14% to 25%.

It's very high form of credit, and on top of that if you miss your minimum payment the debt can then accumulate like a snowball."

Mr Malone describes community credit unions as having a real personal connection to the customer.

Customers can apply for loans online or over the phone but the Credit Union is also human when you need it.

"In many cases when people have challenges around Christmas, its better to come into us and we can not only find a loan, but we can talk about a shopping list and putting in a budget plan that works for you," Mr Malone said.

"That’s so important because we can help manage the anxiety and help people to remember what Christmas is really about, which is spending time with your family."

According to the Credit Union Consumer Sentiment Index, the consumer mood has stabilised over the last twelve months.

The Index showed a 74 rating for October, up around 14 points from what it was in October 2023.

"We are seeing an improvement in consumer sentiment, there’s definitely a more stable consumer mood," Mr Malone said.

"The cost of living crisis is still there, over the last number of years there have been increases in energy costs, with some reductions of late, but still there's an enduring kind of decline in terms of people's buying power because overall the cost of living has increased cumulatively over the last number of years."

If you’re starting your planning now, Mr Malone said there are still some savings that can be made in the coming weeks.

"Some of the best tips we’ve heard are from our members," he explained.

"One is about in the run up to Christmas cut back on the daily indulgences like your daily morning take away coffee, bring your lunch to work, cook at home instead of getting a take-away."

"We’ve heard from members this can save €50 or €60 euro a week."

These are some of the other tips shared by Credit Union members:

• Take advantage of loyalty cards to avail of exclusive offers from supermarkets and retailers, and to watch out for retailers that are price matching, all of which can cut down on expenditure
• Consider doing a Secret Santa, especially in a large family to just buy one present and keep costs down
• Explore the opportunities of pre-Christmas sales like Black Friday, but don’t make any impulse purchases
• Search your attic and cupboards for gifts your were given that can be re-gifted, sell them or donate them to charity

Mr Malone’s best advice is to start a savings account in January which can be lodged by payroll, debit cash payment or having the children’s allowance paid directly into the account, with funds paid out in November.

"Credit Unions actively encourage saving for Christmas as this empowers our members and helps mitigate anxiety or panic they may set in over the Christmas period, allowing members to fully enjoy the true spirit of Christmas," he said.

"If you are the person who keeps track of the money in your household, you deserve a Christmas too – so a little planning will help you take financial control this Christmas."

MABS

The Money Advice and Budgeting Service (MABS) says a realistic budget will be different for every household, depending on the on the number of adults and children.

Its an expensive time of year for every household, but it should be enjoyable and not a time of stress and financial strain, according to Karl Cronin, Regional Manager for North Connacht and Ulster MABS.

"There are free Christmas Budget Planning templates available online which will help you plan your Christmas spending," he suggested.

"If you are the person who keeps track of the money in your household, you deserve a Christmas too – so a little planning will help you take financial control this Christmas."

There are still a few weeks left until Christmas, so it’s not too late.

But remember, the regular bills still need to be paid in the New Year.

MABS recommend following these tips to avoid a spending hangover in January when Christmas is just a memory.

• Make a list of what you need to buy and divide it into gifts, food, clothes and socialising Prioritise your list – if you have a limited amount to spend, what can you cut back? Are the items on your list "needs" or "wants" – the needs should you prioritised over the wants Once you have finalised your list, set a realistic budget for a reasonable amount you can afford to spend If you need to borrow, only borrow what you truly need and not a cent more. But beforehand, revisit your list and ask yourself – is it worth getting into debt over? Try and repay a Christmas loan within the first 6 months of next year, and then start saving for Christmas 2025 Once you have your Christmas list finalised, keep to it and don’t be tempted by sales, special offers, Black Friday or Cyber Monday deals unless they are on your list Buy small amounts of non-perishable items each week over the next few weeks to ease the Christmas food shop. And remember, the shops only close for 1 or 2 days, so there is no need to over shop. When shopping online, watch out for delivery times, returns policies and potential customs charges, especially if buying from UK websites. Secret Santas are great! Talk to family & friends about not exchanging gifts with everyone or setting a spending limit, or maybe enjoying a group experience together instead. You may not be the only one struggling with the cost of buying gifts for everyone

The MABS Helpline is open Monday – Friday from 9am – 8pm on 0818 07 2000.

The MABS Advisers offer advice and guidance on budgeting and debt issues and information on supports that may be available at this time of year.