Counting down the hours to that long-awaited January payday? You’re not alone. Here, financial journalist Laura Whateley offers her advice on making your pounds stretch further in 2019.
Two years ago, I did something very grown up: I hosted Christmas.
My parents and my mother-in law came to ours for a few days, and while I put my poor mum in charge of cooking the turkey, I felt a martyr-like pressure to provide her with one that was Marks and Spencer’s very best. But I think it was the point at which I was sourcing Nocerella olives and Marcona almonds from Borough Market, before dragging myself around Hotel Chocolat to find mini reindeers to put in my sister’s boyfriend’s stocking, that I realised I’d lost the plot.
To make matters worse, I’d whacked everything I’d bought on a credit card that I then had to spend months paying off, to the detriment of things I’d have much preferred to waste my earnings on.
Just like the “I must buy a new one, this is the bra that I’m going to wear on The Best Day Of My Life™” shopping hype that descends on brides the minute they announce they’re engaged, there is something about the festive season that can send us into a frenzy of panic buying over-the-top presents and overpriced snacks.
Maybe it’s the memories of childhood magic that are impossible to recreate, or the nagging feeling of guilt that it’s up to you to make sure everyone you love has the most wonderful time of the year. But let me tell you this: your sister’s boyfriend will not give a s**t about the reindeers – everyone prefers Quality Street, anyway.
So, when I hosted Christmas again in 2018, I did it with a budget, and far fewer unrealistic, schmaltzy ideals. I put a cap on how much I wanted to spend, from cards and stamps to rank, pine-sap flavoured cocktails with friends. I didn’t buy a new outfit for New Year’s Eve, and I certainly didn’t go anywhere near an artisan market.
As we all know, January is grim enough without having to face a massive money hangover, too.
But if you did succumb to the urge to splurge this past festive season, don’t panic. Here, I outline five straightforward ways that will help us all get through the next month without crippling our bank accounts – especially as we wait for that far-off January pay day to finally arrive…
Decide how YOU want to spend your money in 2019
A very wise financial coach once told me that one of the main reasons people are not in control of their finances is because they feel unable to design their own life. We often believe there is someone or something else dictating how we should spend or save our earnings, or how much we should get paid. But there is no right or wrong way to spend or earn, and it is up to us to decide what we do with our money.
So set yourself some goals for what you want from your money in the new year, and work out how to get there. Create a few saving rules, too: carve out a couple of days a week where you only buy necessary items, or ask yourself whether you can live on 90% of your income. If so, make it happen, and put aside the rest.
Do not be seduced by the sales
How much we spend is often dictated by people who own very tempting shops, full of products we don’t really need, that are often being shifted at irresistible prices during this time of year. Remember that these items will probably be discounted further in a few weeks, or even days. And if you leave one in your online basket overnight, you’ll probably receive a discount code to encourage you to complete your transaction.
Behavioural economists believe we are programmed to act irrationally in the face of a bright red “must end soon” sale sign.
“Permanent sales tap into an array of psychological biases which ultimately encourage us to spend more on the high street,” says April Vellacott of behavioural economics consultancy Cowry. “Signs saying ‘Last chance to buy!’ or ‘Flash sale!’ motivate us to spend, because we place more value on items that seem to be in short supply.”
We also over-value anything that appears to have been marked down in price. Known as the anchoring effect, we use the first price we see as a reference point for future judgments of price, which means that when we see a £60 jumper that used to cost £100, we perceive it as being far better value. Don’t fall for it.
Use more cash
Remember when you used to go out in sixth form with only cash in your purse, and you somehow managed to get tipsy, and take a taxi home, for only £15? Prices may have changed since then, but I can guarantee that you will spend less money on wine if you start paying for it in notes and coins again.
Another behavioural economics term to be aware of is “the pain of paying”. This means that the harder it is to pay, the less we want to do it, or the more we think about it first. And digging out a £20 note from your purse, or trying to fish out a pound from the bottom of your bag, is definitely harder than simply tapping your debit card or hovering your thumbprint over Apple Pay. So if you want to try and reduce your spending in the new year, ditch contactless for a bit.
Clear your debts as quickly as possible
I would suggest avoiding credit cards for big spending periods like Christmas altogether. But if, like me, you find yourself with a large MasterCard bill come January, shift it on to a 0% balance transfer card immediately. These cards give you a set period of time (maximum 33 months) in which to repay your debt before you have to pay interest on top.
Interest on credit cards is huge. If you are clearing a card with a typical rate of 19.9% by minimum payments, you will end up spending more than £3,600 interest on a debt of £2,500.
Love your future self
Make this the year you think about setting aside a bit more money for your long-term future. The magic of compound interest means that the younger you start saving, even tiny amounts per month, the longer it has to grow into something substantial.
This particularly applies to money that is invested in the stock market. If you have a company pension then you are already invested in the stock market, so don’t be frightened off by thinking that it’s too complicated to get involved with. A pension is the best way to save for the future because you get “free” money from the government in the form of generous tax relief.
If you want to get hold of your savings sooner, you can set up a stocks and shares ISA, but you should be prepared to lock your money away for at least five years, preferably 10 or more. Check out apps such as Moneybox or Plum as good starting points.
Images: Getty, Unsplash