Christmas on a budget

What should you do if money is proving to be tight at this expensive time of year? We take you through some key steps to retain control of your finances and keep your cool this Christmas.

Christmas is stressful and if, like most people, you leave Christmas shopping until the last minute, it can turn into not only a shopping-expedition nightmare, but a financial one, too. But don't panic! There are ways to take the strain off your purse strings if you follow a few key guidelines.

Cutting down on your spending
The secret is budgeting. It sounds simple - but it can fill some people with dread. There are two types of budgeting. The first is an expenditure-cutting exercise. This involves writing down your monthly expenditure, comparing it to income and seeing where savings can be made.

Keeping a personal audit can help with this, as it helps you identify bad habits and cut them out – you will be amazed at how much spare cash you can find by bypassing expensive lattes on the way to work, and so on.

Re-organising your finances
But it isn't just cutting coffees that can save you money. The real savings can come from getting clever with cash. Look at how much you pay on your credit cards; swapping to a card with a lower interest rate can save you a small fortune. Changing gas, electricity and telephone providers can also free up cash - getting smart about how you use your mobile phone will also do wonders.

But the real biggie is to move your mortgage. OK, it may take a month or so before you see the savings come through, but the fact is you will be better off in the long run and you can work these savings into your overall plan.

Cutting expenditure
Here's a quick summary of what you need to do to take control of your finances:

Undertake the budgeting exercise Keep a money diary Switch credit cards and loans to ones with lower interest rates Check bank accounts to make sure they have competitive interest rates for being in credit and when overdrawn Switch utility and telephone providers to get a better deal Switch mortgage providers.

The second type of budgeting is writing down who you have to buy presents for and set an overall limit for it - don't forget to add in the cost of wrapping paper. The only way to make this work is to make a list with the maximum amount you plan to spend on each person.

Tip – when you do hit the shops, take the list and stick stringently to it, otherwise it won't work. It may sound stingy, but presents aren't about price, they are about the thought. In my list I give a great deal of thought beforehand to the people I am buying for and put some ideas down to help me when I am shopping. I also go for quality rather than quantity. One of the best presents I ever bought cost about £3!

And don't forget that Christmas wardrobe. This is where a lot of women really lose it. Ask yourself, 'Do I really need a new outfit for every party?' and set a budget for your party wardrobe. And remember, it's not what you wear, it's the way you wear it. One great little dress with some smart accessorising can take you through the party season and won't break the bank.

Paying for it
Using cash rather than plastic is a good idea, but sometimes, particularly at Christmas, this can be dangerous. So if you do use plastic, make sure you have enough in the bank to pay it off and/or use a credit card with a low or 0% introductory interest rate (that way you can pay it off over the next six months or so without it costing you anything extra).

I'm not a fan of store cards, but they do give discounts, which can be attractive. The trick is to buy on the store card and immediately pay it off or, better still, pay it off with a credit card that has a 0% interest rate.

Customer loyalty cards can also be useful. If you have built up your points, use them to take the sting out of your Christmas shopping bills. Also look out for interest-free credit, particularly on very large purchases.

To summarise:

Make a list of who to buy presents for Set a budget and stick to it
Pay off cards immediately or use cash
Get a credit card with 0% interest rate (make sure you pay off the balance before the introductory rate runs out)
If you use a store card because of the discount, pay it off immediately
Make the most of points built up on loyalty cards.

Have a great Christmas!

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