A financial hangover

Producing a budget is the most important step to financial freedom

Christmas is a special time of the year, but there are many pressures.

Not only are there endless parties and invites to friends and family but also there are presents to buy.

According to the Telegraph the average family spends £800 celebrating Christmas with the majority spent on food and drink. The reality is that this is likely to be a lot more. At the start of 2015 the Daily Mail stated that one in eight Britons face a financial hangover as a result of Christmas (at a time where new personal debt has soared to its highest level in nearly seven years).

Of course in writing this blog I don’t want to sound like Ebenezer Scrooge but equally this is something that should make us stop and think. After all we know when Christmas is (December 25th) and we shouldn’t be surprised when it “suddenly” creeps up on us and our finances.

In this blog I want to consider the importance of budgets and plans.

The power of budgeting

The article in the Telegraph stated that 35% of people borrowed or planned to borrow for Christmas in 2015; although many people are able to pay back that debt, many can’t.

Although “we” as a nation don’t like to talk about money, being able to budget is a powerful tool because it can be the difference between borrowing, or not, to pay for Christmas.

For many of us during the festive period we will have time at home and this is ideal for doing a financial health check. Producing a budget is the most important step to financial freedom. On a simple level it provides an understanding of what is coming in and what is going out.

Budgeting is not just about the regular monthly expenditure (mortgage or rent, utilities etc) but also the weekly expenses like shopping and ad-hoc costs like Christmas. If we take Christmas as an example and we spend £800 a year, then by budgeting we will ensure we don’t need to turn to debt to fund it.

Budgeting is the first step to financial planning; when we know what cash is moving in and out (and if there is any surplus) then we can plan effectively.

The financial plan

All of us need a plan.

Our plan can be a single or series of goals. For example, it can be as simple as paying for Christmas next year, or a mixture of goals like saving for home improvements, a holiday or our retirement. We can have as many goals as we want but only when we have done the budget can we work out what we can realistically afford, and achieve.

Taking it a step further and looking at the example of planning for retirement. There is little point in saving £100 a month for retirement if we don’t know what level of income we need to live on and how we intend to fund that.

The budget will tell us what we need today but more importantly it can help us understand what income might be needed in retirement. Only at this point can we work out how much we need to save.

Effectively the plan is about building a road map to the future but it can only be put together when we get the budget right.


Budgeting and planning go together, and if we don’t budget then it is unlikely we will be able to plan and ultimately those dreams we have will remain dreams.

Christmas and New Year are a perfect time to sit down and do the sums. If we work out the budget, then next year we won’t need to turn to credit to fund Christmas (or the holiday we had promised ourselves). (‘Budget’ does not mean cost cutting either!)

Not only that but by knowing what we have and what we need we can realistically plan for our retirement (or any other goals we might have).

So the challenge for 2016 is once all the presents are unwrapped and food and alcohol consumed and we plan to return our bodies back to some sense of normality, let’s do the same with our money because it will make future years a lot easier.

Free guides / tools:

How to build a financial plan

Debt calculator

Budget planner

Financial planning spreadsheet

Note: This is written in a personal capacity and reflects the view of the author. The post has been checked and approved to ensure that it is both accurate and not misleading. However, this is a blog and the reader should accept that by its very nature many of the points are subjective and opinions of the author. This is not a recommendation to buy any product or service including any share or fund mentioned. Individuals wishing to buy any product or service as a result of this blog must seek advice or carry out their own research before making any decision, the author will not be held liable for decisions made as a result of this blog (particularly where no advice has been sought). Investors should also note that past performance is not a guide to future performance and investments can fall as well as rise.

Please note...

Shininglights.co.uk is not regulated by the FCA. The information is purely a guide and it is the responsibility of the investor to carry out their own research before making any final decisions. We will ensure that the information is as accurate as possible but we cannot be held accountable for any errors or omissions. No products are sold on this site, nor do we endorse any particular product or investment.

Where there are links to third party sites this is not an endorsement of that site, and we cannot be held responsible for the accuracy of the information on that site.

Where there is reference to performance you should note that past performance is purely a guide and investments can fall as well as rise.

The information on the site belongs to shininglights.co.uk and cannot be replicated or copied without our permission.