Ho ho ho - plan your festive finances or the laugh could be on you!

"Angels we have heard on high, Tell us to go out and buy!" Tom Lehrer's lyrics still resonate today. And with barely two pay packets to go to Christmas, if you haven't already started your financial planning for the festivities, don't get your tinsel a twist - there's still time to avoid financial meltdown. Short of taking what we might call the Blue Peter option of making your own cards and gifts out of cornflake packets, there are a host of places you can turn to fund your festivities on the cheap.

Often people leave it too late to start sorting out their finances which could means that you could end up paying for this Christmas this time next year.

Work to a budget

The first thing to do is write a budget. Even if you expect a bonus - write a budget - money left over can go into a high earning savings account or tax free individual savings account. Write down every gift you plan to buy and include groceries and the cost of entertainment as well. Shop around and look where savings can be made.

Work out how much extra you need over the holiday period and, if you can, put the money aside from your next two salaries and only use credit if necessary.

Salary advance

If you are sure that you will need extra funding then before seeking out expensive loans and credit cards, look for cash sources that are potentially free. Most employers pay their staff before the big day and your employer may provide you with a further salary advance if you ask.

While on the face of it, this could be interest free and a good short-term solution, the problem is that January will be a long and frugal month. If you are not disciplined, you could end up over-spilling onto a credit card or even worse, by the end of January you could be in danger of going over the overdraft limit on your bank account and incurring distinctly unfestive fees.

Check what other goodies your employer has on offer. Some offer discounts at shops and restaurants, which could come in handy.

Overdrafts

Agreed overdrafts on current accounts cost between 7.75% and 9.8% are useful for getting over expensive times of the year because they are flexible and there are no redemption fees. But you must treat them with care. While the interest rates are reasonable, go over the overdraft limit and it will hurt you deep in the wallet because interest rates rise sharply sometimes up to more than 30% and you may incur penalty fees.

25 October 2006 © Moneyextra.com

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