Festive cheer

Posted on: 05 December 2014 by Gareth Hargreaves

Steve Wanless of Worldwide Financial Planning looks at how best to stretch the pounds in your pocket this Christmas.

manage your finances at Christmas

Even before the Christmas decorations come out of the box, thoughts turn to extravagant presents and lavish eating over a holiday period that seems to get longer and longer.

Christmas day is a Thursday this year, as is New Year’s Day. For many the break will start on Friday 19th December (maybe with an office party) with a slow return to work on Monday 5th January.

We will probably eat and drink more than the medical experts would recommend. But should we, or do we, need to spend recklessly on presents, decorations and food and drink?

The debit card Switch estimates that Britons will each spend £868 on Christmas this year; interestingly, that is only £6 more than the 2002 figure.

The financial collapse of 2008 and subsequent recession has certainly made us more careful with money.

The Switch research shows that spending on food, drink and decorations will increase, while the amount on presents will be £16 less than 12 years ago, £345.65.

Rather strangely, only 3% questioned thought they would do the majority of their shopping on-line. Two-thirds admitted they would be dipping into savings, 9% said they would pay for Christmas with a credit card or loan, while 19% confessed they have failed to budget for the festive season.

As with all financial commitments, which your Independent Financial Adviser (IFA) will continue to remind you, planning itself can bring its own rewards. Even if the internet is not the final point of purchase, it allows the customer to examine carefully different products, and the cheapest place to buy them.

In the personal financial world, we tend to think it is only the big-ticket items – mortgages, pensions, ISAS and other investments – that the expert advice and knowledge of IFAs can give significant reassurance and value.

Not so. Annual financial decisions, in the renewal of all sorts of insurances, are just as important. Often they are hurriedly waved through every year without any research or consideration into alternatives; “there’s just a small increase, why bother!”

Such laziness could be costing each of us thousands of pounds every year. “Take care of the pennies and the pounds will take care of themselves” is the watchword here. An annual saving of £200-300 on each of several policies soon adds up.

Traditionally, we do not change our buildings, contents, car, health or travel insurance very often. Buying a property often leads to taking out the buildings and contents insurance with the mortgage lender; and there we remain while the mortgage is in place.

To make considerable saving requires a little time, effort and planning. Firstly, by keeping a record of when policies are up for renewal; and then by doing some research when the renewal notice comes through, normally a few weeks before the due date.

Comparison websites are a good starting place, but they need to be treated with caution. They will give you the names of the companies that specialise in the type of insurance you are after – and the basic cost of a policy. You need to be careful about what is included – and, more importantly, what is excluded – in the cover.

The consumer group Which has recently researched the market for those who want to compare electricity and gas tariffs in order to get the best deal. The results were rather alarming.

Only in 5% of the cases were the suppliers following the guidelines introduced by Ofgem (which regulates the market in the UK) in April. The regulator has been attempting to make the energy market simpler and fairer.                              

Under the new guidelines, suppliers have to provide a tariff comparison rate (TCR), a single figure to measure the costs of that particular tariff to help consumers get the best deals. Ofgem has likened this rate to annual percentage rate (APR) on interest charges that accompanies credit cards.

Which called 13 suppliers, including the Big Six, as normal consumers enquiring about their TCR rates. Of the 78 calls, only FOUR provided accurate information. Only npower and E.ON were able to give that information – and then in only two of the six calls made to those companies.

“If the energy companies can’t even explain how to accurately compare tariffs, then their customers have no chance,” admitted Richard Lloyd of Which.

As well as providing valuable information, financial comparison websites also give advice on other ways of keeping the costs down, even at Christmas.

Financial journalist Martin Lewis has come up with his 40+ Xmas MoneySaving Tips

Some are fairly obvious, i.e. No 1 “Plan for affordability not desirability”; others rather cheapskate, i.e.: No 5 “Save with the free Christmas IOU generator” so you can buy the gifts cheaper in the January sales.

But many are sensible, such as No 3 “Get fancy perfumes for a basic price” by going to specialist perfume stores or online sites and No 13 “Find the cheapest place to buy gifts in seconds” by using the internet to search.

If you really want to keep costs down, the Good Housekeeping magazine has come up with a Christmas lunch for eight at just £2.66 a head!      

You do need to shop at different stores for the cheapest ingredients – a Braemoor turkey from Lidl (£9.99), a Christmas pudding from Sainsbury’s (£2) and a Christmas cake from Iceland (£3).

The total cost across the various 10 supermarkets was £21.31 – the cheapest total at one store was Iceland (£27.84), followed by Lidl (£28.13), Morrisons (£29.12) and Aldi (£32.06).

Not everyone is counting the pennies or pounds this Christmas. The new John Lewis two-minute advert featuring the penguin “Monty” is already very popular. Just as well – it took nine months to put together and cost a staggering £7 million!       

Speak to an IFA about your financial health and security ‘Planning not just for Christmas’, call us on 0800 0112825, e-mail info@wwfp.net or take a look at our website www.wwfp.net.

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