Here's wishing you a financially healthy Christmas
I’M sure many of the organised are deep into Christmas shopping and others not so, as they desperately think what to buy to make that moment special.
The danger, of course, is that we throw money at it, hoping that the spend will impress, only to feel the pain at the end of January when that whole pay cheque is wiped out by the credit card bill. February is a long cold month.
Studies show the buyer/giver focuses heavily on that moment of impact, the moment of glee as the paper is opened. It’s a moment of ‘Didn’t I do well to get this for you’. A moment of acceptance through a consumer item.
The same study shows the recipient gleans most benefit from the thought and the ongoing experience. We’ve all received an expensive present we don’t want – an awkward moment around the table.
After Brexit and Covid, five years of our lives have been paralysed. It’s fine to go a tad crazy in the midst of all that and look for a present to make it better, but just consider the longer-term impact. Borrowing and spending £1,000 is easy. Repaying it is a much bigger uphill struggle.
Money is the biggest cause of stress in adults with 61 per cent stating this. The UK’s average financial wellbeing is measured at just above ‘poor’. Some 36 per cent of women suffer stress at Christmas, trying to make it as special as possible.
Perhaps one of the biggest stress factors (and I remember my dear mother in this), was comparing to others. The study shows 41 per cent suffer from this, when in reality, all is never what it seems. If there is one place to feel unhappy it’s comparing yourself to others - as futile as pushing a river up a hill with a cheap toilet roll sheet.
No-one tells you their financial woes or debt, but their social media will gladly show one of the carefully edited 100 photos they took and selected to show how good things are. We are all in various ranges of stories. Editing only edits that.
Psychologists advise us to focus on experiences, togetherness, acts of kindness, making memories, and being present.
I have never used my greatest ever present. I’d asked my girls never to buy anything as I needed nothing, and they popped up on Christmas morning with handwritten and drawn vouchers for a cup of tea; breakfast in bed; a hug; or evening meal made for me.
I still have them, keen not lose the memory they gave me at the time. They understood what my needs were, and created something, rather than buying it. They think I’ve lost them or forgotten them!
Studies also show that passing on memories, books or offers are so powerful in the hands of the recipient where clearly thought has gone in to match with needs. A card with gratitude in it? A family book where you all write what you have to be grateful for each evening and read out next Christmas? An old photo of historical families pulled together was touted as present of the year once, but undoubtedly gifts from the heart made the most economical sense, let alone impact.
Be careful with the credit cards. Tap and go, or ‘I don’t know what I’m spending’ cards are very dangerous. We’ve lost the connection to the jingling pocket syndrome where we know we are just down to change as the paper has gone. That disconnect can build up a large debt as we swipe by.
Credit card debts can be upwards of 19.9 per cent which is over 17 times the cost of one of the best fixed rate mortgages of 1.14 per cent. Personal loans are also available at around 2.8 per cent APR. Why would you pay over seven times the cost of the debt that you need to?
Interest on a £5,000 loan on a credit card is just short of £1,000. On the above mortgage its £57, meaning you have nearly £940 per year saving to wipe down the debt.
Better that you add credit card debts to the loan or mortgage, reduce the interest and use that interest saved to pay the debt off early.
:: Peter McGahan is chief executive of independent financial adviser Worldwide Financial Planning, which is authorised and regulated by the Financial Conduct Authority. If you have a financial question call Darren McKeever on 028 6863 2692, email firstname.lastname@example.org or visit wwfp.net.