Personal finance expert Rajan Lakhani has shared five practical steps to build a Christmas fund before the festive season arrives. Starting early makes the task far more manageable, he says.
“Sticking to a budget requires planning, discipline, and time spent hunting for deals,” Lakhani advises. His recommendations focus on reviewing outgoings, setting realistic targets, boosting income, automating savings, and making money work harder.
Review outgoings and set a savings target
The first step is to agree on non-negotiables. Lakhani suggests looking at regular outgoings with a critical eye, such as switching supermarkets or opting for own-brand products to cut grocery bills. He also advises reviewing spending on small luxuries like coffees or takeaways, checking for forgotten subscriptions or unused direct debits, and using discount codes or cashback sites when spending. These small changes can quickly add up to hundreds of pounds.
Next, set a realistic savings target. Without a clear goal, spending can lack direction and lead to frivolous purchases. Rather than vaguely telling yourself to 'try not to overspend', establish a specific amount to save over a set timeframe. The lead-up to Christmas always brings unexpected costs, so factor a buffer into the budget. Setting this money aside in a separate pot helps track progress and removes the temptation to dip into it for everyday expenses.
Boost income and automate saving
Lakhani also recommends identifying ways to maximise income. This could include working extra hours, asking for a pay rise, or taking on a side hustle, noting that you can earn up to £1,000 per year tax-free this way. Selling clothes or valuable items on Vinted or eBay, or exploring flexible work like tutoring, dog walking, or completing online surveys in the evenings, are other options. Any extra earnings should be transferred straight into a savings account immediately so they don't get absorbed into daily spending.
Once income and outgoings are optimised, automate saving habits. Instead of saving whatever is left at the end of the month, set aside a chunk of money on payday to 'pay yourself first'. Automating this process minimises effort and makes it harder to spend. Setting up a 'round-up' automation that puts aside a few pence every time you make a purchase is another strategy. Smart budgeting apps can also help by automatically moving available money into a separate pot.
Make savings work harder
Finally, ensure that any money saved works as hard as possible. While you might not earn a huge amount of interest over a short timeframe, every little bit helps reach the goal faster. There are highly competitive, inflation-beating rates currently available on easy-access accounts and Cash ISAs, so shopping around for the best deal is advised. Just make sure the money is kept in an easy-access account so it can be withdrawn in the run-up to Christmas.
For those struggling with debt or managing finances during the cost of living crisis, Citizens Advice offers free, confidential support.
