MoneyMagpie Editor and financial expert Vicky Parry warns that Christmas can set you up for a debt-filled New Year – here’s how to avoid it
As we reach the end of 2025, it’s time to take stock of our finances, which can be hard to do with Christmas on the horizon.
But being prepared now and making plans for 2026 can help you start the New Year with a solid plan to be financially savvy, make money and save money where you can, and put yourself into a better place with your finances.
Try to avoid Christmas debt
Many people end up relying on credit cards to pay for Christmas, meaning they spend January in debt. It’s even worse when you’re paid early in December and then have to stretch that paycheque across the festivities as well as wait almost five weeks in January for your next salary.
If you’re feeling the festive pinch, take stock of what you can do to minimise the cost. For example, make the most of cashback websites, supermarket loyalty points and vouchers, and online discount codes. Use sites like Groupon and Wowcher to save money on your online spending, too.
There’s just about time to do a current account switch with a bank that offers a financial incentive too, which could net you up to £200 before the end of January.
Remember when shopping for Christmas gifts that it really is the thought that counts. Have discussions with friends and family about putting spending limits on gifts, or agree a Secret Santa so you only have to buy one gift instead of many. Or, have a thrift challenge – find second-hand items (CEX is great for almost-new tech at lower prices especially if you trade in your old stuff for a voucher).
Set realistic goals for 2026
We’re all feeling the pinch of the cost of living right now. For many, that means it feels like making plans for budgets and saving money is a bit futile. However, putting a plan in place will give you a sense of control and stop financial overwhelm from setting in.
Think about what you want for 2026 and beyond. While it’s tempting to only look at the short term, making the New Year the start of your long-term investment planning is a good idea that future-you will be grateful for. Even setting aside £10 a month into a Stocks and Shares ISA is a good start.
Set save and make goals
There are two types of goals that make it easier to put yourself into a better financial position: save goals and make goals.
Save goals are exactly as they sound: decide on how much you want to save in the year and how much you have to put aside each month to do that. It can help to have a specific goal in mind, such as saving for your first house deposit, a holiday, or a new sofa.
Make goals are all about finding ways to make more money through side hustles, current account switches, refer-a-friend bonuses, and – of course – getting a pay rise at work.
Having two separate goal types will help you make a solid plan. You will be able to decide how much extra a month you can save not based on your current income, but on the extra amount you intend to make through your make money goals. This means your savings goals don’t have to be tied to your current budget, expenses and income.
Pay off debt first
Debt is more expensive than savings. It’s important to have an emergency savings safety net, of course. But when you’re setting save money and make money goals for 2026, make sure that includes paying down your debt.
These can be tied to steps you take to reach your goals, though. For example, shifting your multiple credit card debts onto a 0% balance transfer card could save you a big chunk of money through 2026, giving you breathing room to pay down the balance owed and not get stuck in the interest-only spiral.
Try a savings challenge
There are lots of savings challenges around, so it’s best to research and choose one that suits you best. Some people like to do group challenges to stay motivated, as their competitive nature needs gamification to help them stick to goals.
Other people like to snowball their savings, such as saving £1 in week one, £2 in week two, and so on until they’re putting aside £52 in the final week of December, for a total annual saving pot of £1,378. This can help ease you into a savings habit, and can be motivating if you save physical money in a jar to see it building.
Get free money
Look for ways to boost your income with free cash. That could be through making money with current account switches or online surveys, but the big one is Help to Save. This is a savings scheme set up by the Government.
Previously, it was only available to people on Universal Credit who earned over a large amount in a single assessment period. However, this year that was opened out to include anybody on Universal Credit who earned at least £1 within the assessment period. As soon as you (or your partner on a joint claim) earns £1 while claiming Universal Credit, you can apply for a Help to Save account. Joint claimants can each have their own account.
You can save a maximum of £50 a month, for a total of four years. Your money isn’t locked away, but it’s best to not touch it. That’s because at the end of the second and fourth years, you get a bonus worth a whopping 50% of your highest balance held in those two years.
That means if you save £50 a month, at the end of the second year you’ve saved £1200 and get a huge £600 bonus, with a further £1200 saved and a second £600 bonus at the end of year four. That’s a massive £1200 free cash in total!
Create small thrifty habits
Having big goals is one thing, but achieving them takes time and patience. It can be frustrating when there are bumps in the road or we aren’t getting where we planned to be – whether that’s money, life plans, or at work. That’s why small changes work best.
For example, make it your aim to always try to find something second-hand before you buy new for the whole year. This is not only more sustainable living as you’re recycling unwanted items, but can save huge amounts of money.
Or, set a cashback website as your homepage so you don’t forget to use it, or install browser extensions to make sure you can automatically search for discount codes and cashback before you purchase anything.
Another tip is to always compare your annual policies like car and home insurance, too. Shop around and negotiate with your current provider if you want to stay with them, with like-for-like matched quotes.
Spend to save
And finally: realise that sometimes you have to spend money to save money. There are some things that are worth investing in for the short term to save money longer term. On a big scale, that could look like installing solar panels on your home.
On a small scale, that could be buying a bean-to-cup coffee machine like the Morphy Richards Tazza Pour-And-Go, to get into two habits. The first is taking your coffee with you instead of buying it when you’re out and about, and the second is keeping your coffee warm in the thermal mug so you aren’t wasting forgotten cups that go cold!
There are plenty of things that are worth investing in if you know that they’re going to last a long time and prevent you from buying a cheap equivalent over and over. Gadgets like a Meaco dehumidifier reduce drying time for clothes and prevent damp, especially when paired with a cheap-to-run heated airer instead of using an expensive tumble dryer.
Some homewares are also worth the investment, where you can avoid ‘buy cheap, buy twice’. For example, investing in a Sophie Conran Portmeirion Mistletoe Dinnerware Set will guarantee a beautiful set of plates and bowls that last for years. Or, a high-quality wool blanket from Wool Room or a Harris Tweed Dog Bed from House of Bruar will all last so long that you won’t need to buy multiple cheap ones over time.
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