Festive financial hangover cures

With Christmas and the New Year now firmly behind us, it’s time for many to take the brave step of checking their online accounts and assessing the damage wreaked by any over-exuberant festive spending.

All but the savviest of consumers are likely to have overspent to some degree over the holidays, whether in the lead up to the big day or in the frenzied sales which followed – rather tastefully – online on Christmas morning. Struggling retailers enjoyed a bumper week before the beginning of the New Year as cash-strapped consumers threw caution to the wind and spent billions in the sales. Although this was good news for gloomy traders, shoppers who took advantage of the savage discounts on offer may find themselves paying for their purchases for months or even years to come if they got carried away with their credit cards.

Debt management companies are braced for a surge in enquires from people who spent beyond their means over the holiday period and fear many could have pushed themselves into an unmanageable position to pay for their Christmas celebrations.

A poll carried out by YouGov for the banking technology firm Intelligent Environments in December found that 31% of Britons planned to take out additional credit to pay for their spending over the holidays this year. Concerns were raised by charities and campaign groups that the most vulnerable in society who don’t have access to traditional forms of credit could be among the worst affected. These groups are often forced to resort to expensive doorstep lenders and payday loan firms at Christmas.

Gillian Guy, chief executive of Citizens Advice, said: “After Christmas, Citizens Advice bureaux see more and more people coming to us in debt and having problems making ends meet to cover even essential household bills.”

Despite the repeated warnings, past experience, and surveys telling us we face a mountain of debt in the New Year if we overspend, many of us still adopt a pre-crash banker’s-style laissez-faire approach to our own finances during the season of goodwill. It’s too late to cry over spent money now though.

Economists and politicians are unanimous in their opinion that 2012 is going to be a lot worse than 2011, so it’s wise to take steps to limit the impact of your festive splurge and make sure you’re in the best possible financial shape for the year ahead:

• Refinance your debt

  If you have taken on additional debt to help pay for Christmas, make sure you’re paying as little interest as possible. Compare the market to find a cheap balance transfer credit card or an unsecured loan. Market leaders Barclaycard are currently offering a 24-month balance transfer for a fee of 3.2%.  Halifax are offering 22 months at a fee of 3.5%. These cards are only available to those with good credit scores, so check your file with the three major bureaus (Callcredit, Equifax and Experian) to make sure your record is free from errors before applying. If you don’t qualify for these, look for a card with less stringent acceptance criteria.

• Switch utilities, insurance and communications providers

  Make sure you’re paying as little as possible for your gas and electricity and telephone and broadband services. If you’ve never switched provider before, it’s likely you can make a big annual saving by doing so now. You can increase the savings you can make by signing up for new services through cashback sites, but should never choose a service based solely on the amount of cashback paid alone. Always look for the cheapest possible deal over the length of the contract on offer. If your home or car insurance is coming up for renewal, shop around to see if you can find cheaper cover elsewhere.

• Buy cheaper brands

  Visit cheaper stores or buy ‘value’ or ‘budget’ products when doing your grocery shopping. Doing your weekly shop at Aldi or Lidl can dramatically cut your grocery bill if you usually use more expensive supermarkets. Both Aldi and Lidl scored well in a Which? shopper satisfaction survey carried out last month.

  Which? executive director Richard Lloyd said: “The tough economy and rising food prices have seen cash-strapped consumers heading to the discounters for their low prices and special offers. Aldi and Lidl have climbed to second and third place this year, overtaking Marks & Spencer. And this doesn’t mean compromising on taste, as our tests show they sell a range of products that compete with the premium brands.”

  If you can’t bring yourself to forgo your regular supermarket, swap your regular purchases for cheaper or own-brand alternatives. While this may not always be the most palatable option with fresh food, does it really matter what brand of bleach or tin foil you use?

• Assess your expenditure

  Take a close look at your income and expenditure. Make a list of everything you have coming into your household and everything you have going out. Go through your spending with a fine-tooth comb and look for ways you can trim your budget. Cancel expensive cable or satellite television packages you rarely use and work out how much you’re spending on miscellaneous items like coffee and sandwiches. Little changes such as taking a packed lunch to work or forgoing your morning latte on the way to the station in the morning can result in big savings over the course of a year.

• Dry January

  Although the British Liver Trust did its best to spoil the good intentions of thousands of drinkers earlier in the week by announcing that taking a month off from alcohol after Christmas would do little to improve your health, steering clear of booze (and fags if you smoke) over January will have a positive effect on your bank balance. Extending your dry spell over the rest of the year could save you hundreds – if not thousands – of pounds, depending on how much you put away. Cutting down your drinking over the long-term will save you money and improve your health.

• Seek help

  If feel your debts have become unmanageable, seek help from organisations such as Citizens Advice or the Consumer Credit Counselling Service as soon as possible.