Christmas Cheer Can Be Dear…

Centre for Decision Research

Dr. Simon McNair is a Research Fellow at the Centre for Decision Research at Leeds University Business School. His primary interest is in financial decision making, and particularly the role of emotional factors therein. Simon was recently awarded a three-year Leverhulme Early Career Fellowship (beginning 2016) which will see him work in partnership with the Citizens Advice Bureau in Leeds and Bradford to develop a “psychological toolkit” to support those in financial difficulty. Simon is available for interview to discuss this project further and can be contacted via

Christmas lights in a shopping district

“It’s that time of year again…!”

For many people, that time of year – while ostensibly celebratory – is one defined by financial worry and stress. A recent interview study conducted by my colleagues and me at the Centre for Decision Research (CDR) revealed that people commonly engage in almost competitive spending, for example, feeling the need to outdo their colleagues’ and peers’ expenditure:

"Christmas is like a competition around here – who can spend the most, who’s got the most stuff to show off. No-one can afford any of this stuff! It’s bravado." (Female interviewee, 40-50 years old).

What was also clear was that many people also feel an inordinate amount of pressure to provide for their friends and family:

"If you’ve promised the kids things for Christmas, and then you don’t have money…you’re very pressured and desperate in trying to get these things for your kids, in trying to fulfil these promises. You can’t sleep sometimes." (Male interviewee, 20-30 years).

At a national level, figures from the Office for National Statistics indicate reliable annual spikes in retail spending of 45% to 55% in Q4 each year. Hardly surprising, perhaps, but when we consider that, this year, the UK’s National Debt Line saw an 80% increase in calls between December and January due to people experiencing a Christmas “debt hangover” – the largest increase for that period on record – it’s abundantly clear that many people are severely over-stretching themselves during the festive period.

This year, and for the second straight year, Brits intend to spend more in total on Christmas gifts (£294 per person) than any other nation according to research by ING Bank involving almost 15,000 people across 15 countries. Interestingly, while 43% of Brits say they actively save towards Christmas (second only to Americans), 42% also indicate they do not know how much they will spend in total.

Even more worrying is the finding that amongst those that do plan a Christmas budget, research by HSBC shows that as few as 13% of UK individuals indicate they manage to stick to their spending plan. The costs of borrowing at Christmas are also dire, with new research by the Citizens Advice Bureau reporting that using payday loans at this time could lead to as much as a 72% increase in the final costs for an average household.

Christmas cheer is indeed, then, dear. But besides the financial pressure are the psychological pressures that often go overlooked. The UK market research company Which?, for instance, noted that 92% of people agree there is pressure to spend more at Christmas. An interesting study by the Money Advice Service revealed that the top three reasons given for festive overspending are feeling pressured to please others; feeling obligated to provide the “perfect Christmas” for kids; and lastly: wanting to treat yourself. Not knowing how to budget was the lowest ranked reason people gave for overspending at Christmas.

So, as pervasive and pernicious as post-Christmas debt is, what we learn from the above findings is that while budgeting and financial planning are fundamentally a sensible approach, it’s one that many people do not effectively engage with. Budgeting is, in and of itself, something that people find aversive as research by Blair Kidwell and colleagues has shown. As such, coupled with the stress and pressure people already feel about meeting perceived obligations at Christmas, the very act of sitting down and identifying exactly what your financial constraints are at this time may simply prove too much for people to cope with, and so undermine any attempt to do so.

Last year, we at the CDR conducted some initial research to that end. We asked: taking account of people’s different socioeconomic backgrounds and their money management abilities, to what extent does someone’s psychological resiliency continue to influence their level of festive spending and borrowing?

Our study indicated that while better money management skills were associated with spending more within one’s means, and being less likely to have borrowed, this was only part of the picture. Irrespective of financial skills, how people cope with stress was an important predictor of expenditure – those who engage in more denial-based coping (think “burying your head in the sand”) spent more overall, while those who engage in more “active” coping (ie who actively confront their stress and attempt to identify what changes they can make to circumvent it) spent less.

Those who attempt to cope with stress by suppressing their emotions were more likely to borrow, and amongst those who did borrow the amount of borrowing significantly increased for deniers. Additionally, both amount spent and amount borrowed increased further for people who feel their circumstances are caused by factors not within their control – lacking a sense of volition, then, can also drive up costs.

What might we take away from this? Much emphasis is placed on encouraging and informing people to plan their Christmas spending (the Money Advice Service’s Christmas spending planner is a popular tool, for instance), however, what remains lacking is supplementary advice concerning how people might psychologically deal with the stress or pressure they may experience concerning their finances.

Having a resilient mindset – feeling confident to act, seeing the merit in acting to manage one’s finances, and being able to confront stress head-on – may also be critical factors that support one’s attempts to better keep in control of spending at Christmas. Without such skills, the psychological barriers people face may encourage people more towards a “buy now, worry later” attitude that, at Christmas, leaves many in significant financial difficulty.

The importance of psychological resiliency for financial management is now becoming an increasingly pertinent factor in the overall understanding of how people can become more financially capable. Both the UK’s Money Advice Service, and the US-equivalent Consumer Finance Protection Bureau, for instance, have this year called for financial educators and financial support agencies to be more aware of how peoples’ different mindsets may affect their ability to affectively apply practical knowledge and skills with respect to making financial decisions. Our evidence certainly suggests that this stands to be a positive step.  

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