How long will your Christmas debt hangover last?

4 Mar 2016 By Tanya Spence

Today’s blog is from Tanya Spence, Financial Health Training and Learning Development Manager.  While Christmas is long gone, the financial consequences may be lingering still for many households.  In today’s blog, Tanya sets out a 4-step personal budgeting challenge that can help us better support our service users to take back control of their money.

Around 5.7 million people are at risk of falling behind on their financial commitments as a result of 2015 Christmas spending, according to Money Advice Trust data. Consumer borrowing in the run-up to Christmas rose by £1.5bn, the largest rise for nearly eight years. Most people still won’t have paid back their Christmas borrowing by the middle of March; some won’t manage that by next Christmas! This isn’t surprising given the amount of pressure to spend during the festive season; I congratulated myself on avoiding Black Friday, Boxing Day and the January sales, only to suddenly find myself in the midst of a Yellow Friday event! The growth of digital technology and social media also means that it has never been easier to browse and, in one click, buy in the comfort of our own homes. 67% of people polled in the US had bought a present they had heard about on social media.

Of course we all know that the fallout from festive spending can be problematic, increasing borrowing and making it difficult to pay for essentials in the following months. And we also know that many people don’t find it easy to ask for help. So what can we do to support our service users and encourage them to take charge of their finances now before they spiral out of control?

Whilst you probably know that putting together and sticking to a budget is crucial, let’s be honest, it doesn’t appeal to most people! The truth is that many people will only ever put together a budget when they are in crisis or want to borrow money, so they miss excellent opportunities to take proactive control of their finances and save money as a result. But it’s genuinely better late than never when it comes to getting on top of our money. We should be challenging ourselves to find new ways to manage our own money and encourage struggling households to stick to a personal budget, however simple. And if we can help people get back on track now, there’s a better chance they can avoid another Christmas debt hangover next year.

So are you up for the personal budget challenge? Here is a 4-step challenge if you’re keen to help your service users take back control of their money:

  1. How can you improve the way you get your message across to those you support? What does a personal budget even mean to them?  The first step in making these initial messages more engaging is to emphasise the potential gains (e.g. ‘feel in control’, ‘reach that goal’ or ‘be stress free’). And it’s crucial to highlight immediate gains, not just long-term benefits. We know that the human brain responds well to quick wins around money! The second is to recognise that formal budgeting may seem too controlling and be counterproductive, so reassure people that it’s ok to have a degree of flexibility around how much they spend as this will give them a better chance of reaching their financial goals.  Getting a budget started and keeping it going is much more important than making it perfect.
  2. What budgeting tools are you giving people? Remember what works well for one may not work well for others.  For example, at work I find that Windows Outlook is the most useful tool for keeping my weekly work schedules organised, whilst some of my colleagues prefer to use other (more complex) programmes.  There’s no ‘one size fits all’ when it comes to personal budgeting either, so take time to explore the various free tools available (consider mobile Apps as well as paper-based tools) and be ready to signpost to a selection so you can be sure that together you find the most appropriate solution. Don’t forget that the Money Advice Service website includes a range of free financial planning tools for different skill levels. These range from detailed budgets that can accommodate all benefit payments, to a step-by-step guide on using the jam-jar approach to managing money.
  3. Now that you’ve found a good selection of budgeting tools that your service users can use, it’s useful to try them out for yourself. Having first-hand knowledge of what it’s like to use the tools you’re recommending to others will improve your confidence and enrich your conversations.  You might even find the perfect tool to improve your own personal budgeting! This step is crucial to being able to help people more effectively; there’s nothing like personal experience where money management is involved. Money is never just about theory; it’s a deeply emotional issue and people respond better to us when we show that we are personally engaged.
  4. As with all tools, a budgeting tool will be only as effective as the information put into it. Many people get tripped up by the finer points like different time periods. Practice using simple and effective ways to convert amounts (particularly bills) from weeks to months and vice versa, so that the budget accurately reflects real costs. One new approach to conveying information and data quickly and effectively is through the use of infographics. Could you lead your organisation to develop visual ways of giving helpful information that supports service users to understand and feel confident about converting figures in their budget? Or could you try asking for testimonials from people who have found budgeting a useful tool?

A final thought: a budget is simultaneously a record of past good intentions, a snapshot of today’s reality, and a plan for the future. So reviewing last week’s budget with a non-judgemental but inquisitive mind is a powerful way to improve your chances of creating and sticking to an effective budget next week. Done well, budgeting is a helpful friend, not a big stick to beat ourselves (or others!) with. Making one small, achievable change at a time can transform our finances over a period of weeks or years. How will you help others – and yourself – create that change this year?

Good luck and please get in touch to share your experience and thoughts. If you’re interested in writing a blog post about this or any other area around improving financial health, we’d love to hear from you!