Manging your post-holiday expenses and bills
- TBA
- Feb 26
- 3 min read
Christmas may be over, but the financial aftermath lingers.
While you can still imagine the aroma of turkey and red wine, for many, the festive season left behind a burden: debt. Research shows that many people rely on credit (credit cards or loans) to enjoy their holiday, leaving them with bills that can take months—or even longer—to pay off.
Among those who used credit cards to fund their holidays, about a third admitted lacking confidence in their ability to repay.
The Holiday Hangover
Some have joked, "Let me stay in my Christmas daze forever", dreading the moment they wake up to face mounting bills. But how can you tackle these post-holiday financial hangovers?
Here are some practical tips to get back on track:
Tip 1: Don’t Bury Your Head in the Sand
Avoidance won’t help. Start by calculating your short-term debt, including credit cards, overdrafts, and ‘Buy Now, Pay Later’ agreements. Understand your instalment obligations, due dates, and minimum repayment requirements. While it’s not ideal to stick to just minimum payments, knowing this figure can provide a safety net in case of emergencies.
Tip 2: Assess Your Repayment Capacity
Avoid overworking yourself or accruing new debts to pay off existing ones. Instead, create a budget and scrutinise your finances to identify areas where you can cut costs. This will determine how much you can reasonably allocate to repayments.
If your current budget doesn’t cover even minimum repayments, consider seeking help from debt charities like StepChange. These organisations can help you set up a budget, negotiate with creditors, and explore available options.
Tip 3: Prioritise Your Repayments
Focus on keeping up with ‘Buy Now, Pay Later’ instalments and minimum credit card payments. Beyond that, tackle the highest-interest debts first using the ‘avalanche method’ — pay off the debt with the highest interest, then move to the next. This minimises interest costs.
Alternatively, the ‘snowball method’ involves paying off smaller debts first, which can provide a psychological boost. However, this approach may result in paying more interest overall.
Tip 4: Transfer Debt to Lower-Interest Options
Research shows over half of borrowers aim to clear their Christmas debt within a month. However, nearly 40% take 1–6 months, and about 5% take over six months. During this time, interest accumulates: overdraft rates can reach 40%, store cards 30%, and credit cards over 20%.
To save on interest, consider transferring your debt to a lower-interest credit card. Look for balance transfer cards with interest-free periods, allowing you to allocate more money to the principal instead of interest. Essentially, prioritise consolidating debts onto the card with the lowest interest rate.
Tip 5: Develop Good Financial Habits
Once your debts are paid, focus on cultivating better financial habits. Build both an emergency fund and a holiday savings fund for next year’s festivities. Consider longer-term goals such as pensions or Stocks and Shares ISAs. By planning ahead, you can avoid relying on credit for next year’s holiday season.
Bonus Tax Tips for Side Income
If you’ve taken on a side job to repay holiday debts, don’t forget to declare your additional income! In the UK, side hustles often require registering as a Sole Trader and filing a Self-Assessment Tax Return.
Sole Trader Status is Ideal for:
Freelancers (e.g. designers, writers, consultants)
Small business owners (e.g. online shops, restaurants, repair services)
Part-time personal projects
Managing Taxes for Full-Time and Part-Time Work in the UK:
Identify your main job: Typically, the job with higher income is considered your primary role.
Use the correct tax codes: The primary job uses tax code 1257L (tax-free allowance up to £12,570). The secondary role uses BR (Basic Rate), taxing income at 20%.
File your taxes correctly: Your primary job taxes are handled through PAYE, while your side income requires registering as self-employed and filing a Self-Assessment Tax Return.
Adjust as needed: Inform HMRC if your work situation changes, such as your side gig becoming your main source of income.