Half of us have run out of money: what can you do?

The three steps that will cure your Christmas debt hangover

Running out of money in January

By 13 January half of us will already have spent our December paycheque. It's hardly surprising: either we were paid before Christmas Day itself, and saw a major chunk of the cash eaten up by the cost of the festivities; or we were paid after Christmas, and a large chunk of the cash was eaten up immediately by paying Christmas debts. The risk is that in order to get to the end of January we borrow again to see us through, and end up with exactly the same headache in February. So what can you do?

See also: Festive spirit fuels consumer spending spree in run-up to Christmas

See also: TUC issues warning to Government after sharp rise in household debts

See also: How to avoid bad debts, and the borrowing alternatives available

The research, by PR company Ready10 found that part of the problem is that employers bring payday forwards in December - in fact 55% of them pay early, and 23% of people are paid on the last working day before Christmas.

A third of people say they spent their pay packet within 15 days - which means by the end of last week they were out of cash. Unfortunately, pay day is still a long way off. In fact one in five have to wait 35 days or more between pay days at this time of year.

The company has decided to step in for its employees, and make an extra payment on 13 January. Employees can opt to get 50% of their January salary on the 13th, which they can then manage carefully, so they have as much as possible left over by the time they get to January's usual pay day.

For the rest of us, we need a three step solution.

1. Cut expenses to the bone
Author and personal finance writer Michelle McGagh has just spent a year without spending anything beyond the mortgage, utilities, life insurance, charity donations, broadband, mobile phone and basic toiletries. She also shared a £35 budget for weekly shopping with her husband, and she managed just fine (she's written a book about how she did it too). If she can do a year, then we can all manage a fortnight, so we may need to find less than £100 to make ends meet.

2. Deal with the immediate cash flow problem
If you have absolutely nothing left, then you need to think of the most cost-effective way of borrowing £100 - rather than relying on expensive overdrafts or credit cards. Ideally you can get a 0% credit card to tide you over for the month, or ask a family member to lend the cash to you (although you need to be really clear on terms). You can also consider switching to a bank account with a free overdraft buffer - like First Direct which lets you have £250 free of charge. That way you won't end up adding to your debt problems with punishing interest charges.

3. Plan your February
If you're going to avoid this coming up month after month, you need a strict budget for February - possibly another no spend fortnight - and a route map for how you will get to the end of the month without borrowing money again. Then you need to stick to it.

All of this is easier said than done, but if you can stick to the plan, you'll clear your debts and head into 2017 with a clean slate. If you don't get on top of this now, however, you could find yourself still struggling with last Christmas's debts as next Christmas approaches.

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