Let me tell you about my worst Christmas financially.

I spent £800 on presents, food, and activities. Maxed out my credit card, thinking, “I’ll sort it in January.”

January came. The credit card bill arrived. Minimum payment was £25, but I owed £800 at 23.9% APR.

It took me 8 months to pay it off. Cost me an extra £95 in interest. And for what? Half the presents I bought ended up in charity shops by March.

Never again.

If you’re worried about Christmas debt this year, this guide is for you. I’m going to show you exactly how to avoid going into debt, what to do if you’re already in debt, and how to have a brilliant Christmas without the January financial hangover.

The Reality of Christmas Debt in the UK

Let’s look at the actual numbers because they’re quite scary.

Research shows the typical UK household will spend £787 for Christmas celebrations in 2025. This represents an increase of £87 compared to 2024’s spending.

Even worse? Nearly one-third of Britons would choose to scrap or postpone the holiday season if given the option because of financial strain.

UK households spend almost £740 more in December (29% more than in a typical month).

How people pay for Christmas: 35% fund Christmas through disposable income, while 39% dip into their savings

A quarter of shoppers will rely on credit cards to finance their celebrations, 14% will use Buy Now Pay Later services, and 7% plan to borrow from relatives or friends.

The problem with credit: According to Citizens Advice, 1 in 12 people using BNPL services end up with unmanageable debt, and research from Which? shows that 40% of BNPL users have missed at least one payment.

This is why Christmas debt is such a massive issue in the UK.

Why We Go Into Debt at Christmas

It’s not just about buying too much. There are psychological reasons we overspend:

Social pressure: 22% felt pressure to buy more than what’s needed when shopping for Christmas presents and food.

More than 1 in 5 Brits feel pressured to overspend on what they can afford when shopping (21%).

Comparison culture: Seeing what everyone else is doing on social media makes us feel like we need to keep up. 10% said they feel pressure from social media to keep up with trends when they’re doing their Christmas shopping.

Wanting the “perfect” Christmas: We’ve been sold this idea of what Christmas “should” look like. Expensive presents, massive dinner, designer decorations. It’s rubbish but we fall for it anyway.

Deferred payment seems easy: 47% of respondents finding BNPL schemes appealing for managing Christmas expenses. But “pay later” always comes around eventually.

How to Avoid Christmas Debt: The Strategy

Right, here’s how to actually avoid debt this Christmas.

Step 1: Work Out What You Can ACTUALLY Afford

Not what you want to spend. What you can afford WITHOUT using credit.

Your Christmas budget calculation:

• Income between now and January: £____
• Essential bills (rent, utilities, food, transport): £____
• Money left for Christmas: £____

That final number is your Christmas budget. Full stop.

If it’s £200, your Christmas budget is £200. If it’s £500, your Christmas budget is £500. If it’s £50, your Christmas budget is £50.

Step 2: Prioritise Ruthlessly

You can’t afford everything, so what actually matters?

My priorities (when I was broke):

1. Kids having presents to open
2. A nice Christmas dinner
3. Everyone feeling loved and happy

What I cut:

• Expensive decorations
• Posh alcohol
• Designer presents
• Matching bloody pyjamas

Your priorities might be different. Write down your top 3-5. Everything else is optional.

Step 3: Set Spending Limits and Stick to Them

Present limits: Decide how much per person BEFORE you start shopping.

Example budget breakdown (£300 total):

• Partner: £50
• Each child: £60
• Parents: £20 each
• Siblings: £10 each or Secret Santa

Write it down. Stick to it. Don’t go “just £10 over” because that becomes £50 over across everyone.

Food limits: Christmas dinner doesn’t need to cost £150. You can feed 6 people for £40 at Aldi. See my guide on saving money on Christmas dinner [link to your Christmas dinner post] for exact shopping lists.

Activity limits: Free activities can be just as magical as expensive ones. See my guide on free Christmas activities [link to your free Christmas activities post] for 40+ ideas.

Step 4: Never Use Credit for Christmas

This is the most important rule: Don’t use credit cards, Buy Now Pay Later, or loans for Christmas.

Why? Because you’re borrowing from your future self. January-you will hate December-you for it.

The maths: £500 on a credit card at 23.9% APR, paying £25/month minimum = 27 months to pay off, costing you an extra £175 in interest.

You’ve spent £675 total for £500 of Christmas. That’s insane.

If you’re tempted: Ask yourself: “Will I definitely be able to pay this off in January?”

If the answer isn’t “100% yes,” don’t do it.

Step 5: Start Saying No

The hardest part but absolutely essential.

Things to say no to:

• Work Secret Santa if you can’t afford it
• Expensive nights out
• Buying for extended family
• Kids’ activities that cost £50+

How to say no without being rude: “We’re keeping Christmas simple this year” “We’re not doing presents this year, but let’s do a nice walk together instead” “Can we set a £10 limit so nobody overspends?”

Real friends and family will understand. And if they don’t? That’s their problem, not yours.

Step 6: Look for Help If You Need It

If you genuinely can’t afford Christmas, there’s help available:

Charities:

• Salvation Army Christmas appeals
• Local food banks (many do Christmas food parcels)
• Church appeals (you don’t need to be religious)
• School hardship funds

Government support:

• Budgeting Advance (if you’re on Universal Credit)
• Check you’re getting all the benefits you’re entitled to on Turn2Us

Don’t be too proud: These services exist for exactly this situation. Use them if you need them.

What If You’re Already in Christmas Debt?

If you’re reading this in January with a credit card hangover, here’s what to do:

1. Stop Using the Credit Card Immediately

Put it in a drawer. Freeze it in a block of ice. Give it to someone to hide. Whatever it takes, stop using it until it’s paid off.

2. Work Out Exactly What You Owe

List every debt:

• Credit card: £____
• BNPL payments: £____
• Overdraft: £____
• Money borrowed from family: £____
• Total: £____

Seeing the actual number is scary but necessary.

3. Make a Payment Plan

Work out what you can realistically afford to pay each month.

Priority debts (pay these first):

• Rent/mortgage arrears
• Council tax arrears
• Energy bill arrears

Non-priority debts (pay these after priorities):

• Credit cards
• Personal loans
• BNPL
• Overdrafts

Get free help: Contact StepChange or National Debtline for free debt advice. They’ll help you negotiate with creditors and set up manageable payment plans.

4. Don’t Borrow More to Pay Off Christmas Debt

Absolutely DO NOT:

• Get a payday loan
• Use another credit card to pay off the first one
• Borrow from loan sharks

You’ll just make it worse.

5. Increase Income or Decrease Spending

Ways to find extra money:

• Sell stuff you don’t need
• Do extra hours at work
• Side hustles (see my guide on making £500/month [link to your £500 post])
• Cut non-essentials temporarily

Every extra £50 you can throw at the debt reduces how long it takes to clear.

Smart Shopping Strategies to Avoid Overspending

If you’re shopping now for Christmas, here’s how to stay in budget:

Use cash: Withdraw your Christmas budget in cash. When it’s gone, it’s gone. Can’t overspend if there’s no money left.

Delete shopping apps: Remove Temptation. Amazon, ASOS, SHEIN – delete them all temporarily.

Unsubscribe from marketing emails: You can’t be tempted by sales if you don’t see them.

Shop with a list: Write down exactly what you’re buying for each person. Buy that. Nothing else.

Avoid “deals” that aren’t deals: “Buy 3 for £20” isn’t a deal if you only needed one thing.

Use cashback: If you’re shopping online anyway, use TopCashback or Quidco. See my cashback guide [link to your cashback post] for details.

Compare prices: Don’t just buy from the first shop. Google Shopping compares prices instantly.

Alternative Ways to Do Christmas

If you genuinely can’t afford a traditional Christmas, here are alternatives:

Gifts:

• Homemade gifts (baking, crafts, photos)
• Experience vouchers (“I’ll babysit for you”)
• Second-hand gifts (charity shops, Facebook Marketplace)
• No gifts, just quality time

Food:

• Potluck dinner (everyone brings a dish)
• Simpler menu (roast chicken instead of turkey)
• Shop at Aldi/Lidl
• Skip starters and fancy puddings

Activities:

• Free light displays
• Films at home
• Christmas walks
• Baking together
• Free library activities

Your kids will remember the atmosphere and time together, not how much you spent.

How to Plan for Next Christmas (Starting Now)

If you’re reading this before Christmas and want to avoid debt next year:

Open a Christmas savings account: See my guide on Christmas savings schemes [link to your Christmas savings schemes post]. Asda, Sainsbury’s, and Tesco all give bonuses.

Save monthly: £50/month from January = £600 by December. That’s a decent Christmas budget without using credit.

Use the envelope method: Physical cash in envelopes labelled “Presents,” “Food,” “Activities.” When each envelope is empty, you stop spending in that category.

Start shopping early: January sales for next Christmas. Spread the cost over 11 months instead of cramming it into December.

Track what you actually spend: Keep every receipt this Christmas. In January, add them up. That’s your baseline for next year’s budget.

Final Thoughts: It’s Okay to Have a Simple Christmas

I need you to hear this: Having a simple, budget Christmas doesn’t make you a failure.

You’re not letting anyone down by not spending money you don’t have.

Your kids won’t be traumatised by getting fewer presents or eating a cheaper dinner.

Your family won’t disown you for suggesting a Secret Santa instead of buying for everyone.

And if they do judge you? They’re not worth your stress or your debt.

The best Christmases I’ve had weren’t the expensive ones. They were the ones where we were together, happy, and not stressed about money.

That’s what Christmas should be.

Don’t go into debt for one day. It’s not worth it.

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Get Help:

• StepChange – Free debt advice
• National Debtline – Free debt advice
• Citizens Advice – Money and debt help
• Turn2Us – Benefits calculator

Last updated: October 2025