Make your money last until payday

Spending at Christmas leaves many running short of cash in January, so take action now to make sure your money stretches to payday.

We’re only a few days into the New Year, but thanks to the spending fury that engulfed December, a quarter of workers have just £25 a week to live on until payday. 

Spending on gifts, food and drink and nights out during the festive season, has left many with a festive money hangover that means penny counting until the end of the month, according to a survey by deals site VoucherCodesPro.

For most of us, payday still seems a very long way off and money will be short throughout January. However, a few simple steps can help to see your finances through to the end of the month relatively unscathed.

How big is your money gap?


First, you need to work out how much money you will need to last until the end of the month. Factor in bills and essential living costs, such as transport, accommodation and food. Pit this against how much you have.

It goes without saying: Scrap spending that you can do without.  You could find that with a little planning your remaining cash will last until the end of the month.

New Year’s resolutions such as cooking meals from scratch and opting out of work drinks for a few weeks will help you save.

Switch your current account

Simply switching your current account can help bridge your finances. Many providers offer a dedicated switching service and banks are obliged to switch current accounts within 10 working days once your application has been approved.

Until March 3, Halifax is offering £100 to new customers on the day they open an account. First Direct also welcomes new punters to its 1st Account with £100, though the bonus is only guaranteed to arrive within three months of opening an account.

Aside from golden hellos, Halifax and First Direct are also worth considering as both offer interest-free overdrafts, so if you need to dip into the red before payday, you can do so without being charged. The first £250 of overdraft on First Direct’s 1st Account is interest-free, and after this the interest charges are 15.9% EAR, which is one of the lowest on the market. Meanwhile, Halifax is providing 12 months interest free on planned overdrafts to new customers only.

Remember that even if you are already overdrawn, you can still move your current account. Your new provider will use the overdraft on the account to settle the outstanding overdraft with your previous provider. Your overdraft usually matches your existing one if your credit history is good.

Create extra cash


If you’re not too sure about the winter knit from Grandma or don’t really need the vegetable steamer from your uncle, eBay and Gumtree are just two online platforms for selling unwanted Christmas gifts.

Have a clear-out. Music magpie pays money for CDs and DVDs, but also electronics, including hair straighteners.  Local car boot sales are another option if you have a fair bit of junk or unwanted belongings that could do with shifting.

Dip into your savings

Ideally, we should all have around three months’ worth of income stashed in an easy-access saving account for rainy days. As saving rates currently pay a pittance it’s better to raid this than turn to expensive forms of borrowing that will cancel out any returns made on cash.  

You might be reluctant to take money from their ISA, as money out can’t be paid back in if you have already used your full ISA limit.

But with the average rate on a one-year fixed-rate ISA at just 2.15%, according to savingschampion.co.uk, it’s still better to forgo interest on your savings than pay for credit. Especially considering the typical credit card APR stands at about 19%.

Borrow sensibly

If, after doing all of the above, you find that you need to borrow some money to see you through to the end of the month, make sure you thoroughly consider all of your options.

Up to a million Brits use payday loans to pay bills each month, according to research from Santander. But with sky-high interest charges, a payday loan is one of the most expensive ways to borrow money and can spark a debt cycle that is difficult to escape.

It’s a no-brainer but use the cheapest form of borrowing available to you – ideally without any interest at all. As mentioned previously, some current accounts provide interest-free overdrafts. There are also a number of credit cards that don’t charge on spending for up to 16 months. It can take as long as three months to receive a credit card, so this might not be helpful for this January, but could be worth applying for one to keep on hand for future emergencies or large purchases.

Alternatively, if you’ll be able to pay back debt at the end of the month, you won’t be charged interest on spending with any credit card that you own. Just make sure you keep track of what you are putting on plastic so that you don’t run up a bill that you won’t be able to pay off.

Another option is talking to your bank and extending your overdraft. The average overdraft rate now stands at 19.65%, according to figures from the Bank of England, so it will cost you but is cheaper than a payday loan and can be a useful bridge for finances.

It’s also far better to extend your overdraft limit now than to exceed it accidentally when a direct debit comes out and be slapped with a penalty charge or higher rates.

However, before taking on any form of debt, it’s important to work out exactly how much it will cost you in fees and interest so that you aren’t hit with any nasty surprises that leave you out of pocket later down the line. Always plan how you will pay money back before spending.

A spokesperson from the debt charity StepChange said: “Before using any form of credit, people should ask themselves whether they absolutely need to do so and whether they can definitely afford to make the repayments.”

[Related feature: 10 steps to a debt-free life]

Get free help


If you’re financial problems are more serious than running short of a little cash in January, it could be that you need to do more to address your financial situation.

Don’t bury your head in the sand. Make use of the free financial advice and help available, including StepChange, National Debtline, Citizen’s Advice and the Money Advice Service.

StepChange’s spokesperson added: “People need to be honest with themselves, borrowing money just to meet basic living costs may be a sign of a deeper financial problem.”