As the festive season kicks into gear, Brits know their purse strings will probably be feeling as sore as some heads after the seasonal celebrating down the pub. But how much damage could this festive indulgence really do to your financial wellness?
‘Tis the season to be jolly, but over-indulgent purse strings means you’re likely to spend £54,000 on Christmas over your lifetime¹. It’s not just Christmas parties that will see you tapping the plastic, but also spending on Christmas presents, wrapping paper, food and travel.
More-than a third of all adults have ended up in debt over their festive spending, with one in ten happy to push the boat out no matter their finances.
It’s not just the Christmas season that encourages Brits to fritter money over spending wisely. The culprit might be found a little closer to home; your local.
Forking out £28 on food and drinks a time, Brits spend a staggering £91,000 in the pub over their lifetime – although perhaps those notorious round dodgers get off more lightly.
An average of three hours a week spent in the pub adds up to 14 months over a lifetime, and can see Brits drink the equivalent of 13,000 alcoholic drinks and over 3,000 shots, research from OnePoll found.
What seems like a relatively small outgoing can really add up over the long-term. If you were given over £90,000 today, what would you do with it?
Whilst you might want to go out and celebrate with your friends and family, you probably won’t want to spend it all on your usual down the local.
Don’t forget to treat yourself
It’s important you treat yourself throughout the year and for the future. Financial security is about giving yourself opportunities, not taking them all away.
That’s why family budgeting should be focussed on wise personal finance, not stopping spending altogether.
But it is important to realise when you’re wasting money and needlessly holding your future self back from reaching your financial goals. Careful financial planning can help savers reach their financial goals much quicker.
Financial planning can seem intimidating, but it doesn’t need to be. Follow these six tips this Christmas season so that you’re left just nursing a sore head in the New Year.
Six tips for festive financial planning
- Know what you’re saving for
Whether it’s a big family holiday, getting your children on the housing ladder, on a decent retirement, it’s easier to say no to a needless night out when you know what you’re saving for. Your financial goals influence your investor profile, which impacts the way you should try and protect your money and grow it for the future.
- Set your budget
Prioritise paying off expensive debt and building up three months of savings before you decide how to allocate to your savings and festive fund. Once you’ve set the priorities of your budget, try to keep to the minimum as much as possible. It might be difficult at times, but it will be worth it!
- Protect your money
Your savings could be losing value sitting in a cash savings account. The low interest rates offered on cash accounts are being outpaced by inflation. This means any money not earning inflation-beating returns could be losing purchasing power over time. Make your money work harder for you by investing it on the financial markets.
- Focus on costs
Whether you don’t have the confidence to invest yourself, the time to monitor the markets, or the energy after a day in the office, you can get a team of experts to manage your money for you. Be careful though, costs can eat into your returns. Make sure you know exactly what you’re being charged by your provider. Fees should be simple, like with Moneyfarm.
- Diversification
Nobody gets it right every time. Manage the risk in your portfolios by spreading your money across investments, asset classes and geographies. Diversification means you can aim to offset any short-term losses with gains made elsewhere. Exchange Traded Funds are a great way to get diversification at a low cost.
- Look to the long-term
Investing for the long-term might be difficult when you’re saying no to drinks down the pub, or an extra Christmas party, but your future self will thank you.
Long-term investing means you can take on more risk with your investments, which increases your scope for higher returns and means you can avoid any painful knee-jerk reactions to market noise along the way. The longer you can invest, the more you can benefit from one of the most powerful forces in investing; compound interest. This is where the returns you make on your money and reinvested and earn their own returns.
1 The Real Cost of Christmas, The Independent, December 2016
