10 top tips to help employees avoid getting into debt this Christmas

Christmas is an expensive time of year as the cost of presents, decorations, meals out and entertaining all add up. Individuals intend to spend £567 each at Christmas, according to Deloitte’s Christmas Survey (2018), while 46% plan to pay for it using credit cards, store cards and overdrafts, found the Money Advice Trust.

The impact of financial worries over issues like debt can be especially devastating for employees, and increasing numbers of employers are now beginning to recognise the link between this and lower productivity and absenteeism in the workplace.

Here are our top 10 tips for employers to share with their employees on how they can avoid debt this festive season.

1. Plan a budget – Employees should check their bank statements and make a list of what they are spending each month. This will highlight where their money is going and where savings could be made, which could be put aside to help pay for Christmas. They can visit the Money Advice Service ‘Budget Planner’ to plan the 2019 Christmas budget.

2. Agree a price limit with friends and family – It is easy to get carried away at Christmas and overspend. It could be worth suggesting alternatives 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.

3. Buy early – Many shops have some great offers in the months before Christmas, with 3 for 2 and half price deals on toys and gifts, but most of these are gone by December. With a bit of careful planning, it is possible for employees to save a lot of money by using these offers, and it also means that there is less spending in December. However, employees should always check that these offers are genuine savings.

4. Shop around for food and drink – The Christmas food and drink shop has to be the most expensive shop of the year, so it’s best to shop around. There are some great deals to be had. Some supermarket own brands have been getting rave reviews and are a fraction of the price of the leading brands.

5. Look for discounts – It could be worth asking for a discount for expensive purchases or when buying lots of things from the same place, and employees could 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 a gift for someone.

6. Check interest free deals – Some retailers and credit cards offer 0% interest finance deals, where the product is paid off over a period of time. Although strictly speaking it is still a form of debt, incentives like these can be attractive when buying gifts for Christmas. However, employees should make sure they have paid off the debt before the deal ends to avoid high rates of interest.

7. Beware of pay day loan companies – If employees really do need to borrow money this Christmas, it’s best to avoid pay day loan companies 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 a high interest loan like this should speak to Citizens Advice to find out what options are available to them.

8. Plan to pay off debt as soon as possible – For those who do find themselves getting into debt, they should make sure they pay if off as soon as they can. For example, according to Money Advice Service if someone was to borrow £2,000 on a 19% APR and only pay the minimum payment every month, it will take 24 years and 2 months to repay it and £4,731 would be paid back in total. 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. Whatever method is chosen, it’s always best to make paying off debt a priority.

9. Look for ways to save money – Price comparison websites can help employees to compare the different deals for a range of household bills, from utilities to car and home insurance, and the savings can be significant. For example, Ofgem estimates that the average household can save £300 per year by switching gas and electricity provider. Every penny saved can be put aside for Christmas 2020!

10. Plan early for next Christmas – After the festivities there are often some great deals on things for the following Christmas. Employees could 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, commented: “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.

“Employers are now increasingly putting in place classroom based 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,” he added.

This article is provided by WEALTH at work.