Millions of workers across the UK received their December salary early to accommodate the Christmas break. While the early payday was welcome, it creates a notoriously long stretch until the next pay packet arrives at the end of January, leaving many feeling a significant financial squeeze.
Expert Advice to Bridge the Financial Gap
Aseem Munshi, Founder of the financial app Updraft, has provided essential guidance to help households make their money last. "The key is proactive planning," Munshi advises, highlighting that a strategic approach in December can prevent a cash crisis in the new year.
1. Create a Combined Budget for Two Months
The first crucial step is to draft a single budget that encompasses both December and January. This prevents overspending on gifts, festivities, and food in December and suffering the consequences weeks later.
"Every household is different, but a sensible benchmark is to spend around 1% to 2% of your annual household income on Christmas," Munshi suggests. For example, someone with an annual income of £25,000 should aim for a Christmas budget of roughly £250, or a maximum of £500 if stretching finances.
To assist with this, Updraft has created a dedicated Christmas budget calculator to help individuals generate a personalised spending limit for the festive period.
2. Avoid the 'Buy Now, Pay Later' Trap
While convenient, Buy Now, Pay Later (BNPL) services can create a debt pile-up in January. Over a quarter (26%) of UK adults now prefer BNPL over credit cards for everyday spending.
"Spreading payments feels manageable in December, but the repayments often converge in January, leaving people with multiple bills at once," Munshi warns. With total BNPL spending reaching £16.8 billion in 2023, steering clear of these schemes can help avoid a severe post-Christmas financial hangover.
3. Use the Envelope Method for Spending Control
An effective, tangible technique to manage money is the envelope saving method. This involves withdrawing cash, dividing it into categories like groceries, travel, and socialising, and placing the allotted amounts into physical envelopes.
The rule is simple: spending stops when the envelope is empty. This makes expenditure visible and intentional. For those unsure how to allocate funds, the 50-30-20 rule offers a straightforward framework: allocate 50% of income to essentials, 30% to flexible wants, and 20% to savings or debt repayment.
4. Generate Cash with a January Winter Clean-Out
When budgets are tightest in January, a thorough clear-out can provide a vital financial boost. Selling unwanted clothes, shoes, and accessories on popular platforms like Vinted and Depop has become an efficient way to declutter and raise funds simultaneously.
Once an item sells, the money can reach your bank account in as little as 10 days, offering timely relief during a lean financial month.
By implementing these practical steps—budgeting across two months, avoiding deferred payment schemes, using physical budgeting methods, and generating extra income—Brits can navigate the long gap between December and January paydays with greater confidence and control.
