I wonder how many people have been trying to extricate themselves from a financial commitment incurred trying to keep up with their neighbours, work colleagues and family without giving the embarrassing impression that they can’t afford to keep up.

We have all suffered from peer group pressure, that is, the competitive nature of life as we know it. It might be a case of ensuring your children had the same toys, equipment, clothes as all their friends. It might be having a better car than your neighbour’s or a work colleague. Or it might be going on a more exotic holiday.

We can all suffer from this but perhaps one of the benefits of this current financial meltdown is that it presents an opportunity to reappraise your financial position and an excuse for reducing financial commitments.

Almost without exception, everyone is affected by the present difficulties and it is much easier to explain away changes that you are making yourself on external factors than to have to admit that you may be suffering financial difficulties yourself.

What is wrong with using this as an chance to educate your children on the value of money, the fact that in life you can’t always have what you want and there are times, like these, that circumstances dictate that we all have to be more prudent? 

Why not start now with this year’s Christmas gift list? Most children have more toys than they know what to do with anyway. It wouldn’t do any harm to say this year that we are all going to pull our horns in and spend less and I imagine it will have very little impact on the enjoyment of this Christmas.

Instead of appearing to be struggling financially, this can be explained as being clever, smart and prudent way of managing your money.

Do you really need two or even three overseas holidays this year? Instead of going long haul for the sunshine, why not look at more exotic locations but closer to home and on a self-catering basis rather than all inclusive price? 

There is a simple analogy to the personal financial reappraisal, and that is the corporate or business restructuring plan. If ever a company had an opportunity to restructure its business and cut costs without taking any blame themselves, then the credit crunch is it.

Shedding jobs, cutting back premises, reducing expenditure on entertainment etc can all be blamed on the financial meltdown. Companies are taking this opportunity to get all the possible bad news out of the way at once so that they can rebuild their balance sheet and reserves and cut costs.

And if they survive the present downturn, the business will be far leaner and efficient and able to move forward when the economic cycle picks up and is in a much healthier position.

Apply the same principle to your personal finances. The Government has helped to some degree in a reduction of taxes, interest rates have been cut significantly to help borrowers, now it’s up to the individual to apply these savings in a sensible fashion, rather than assume this is an additional disposable income to be spent in the January sales.

The nonsense of the commercial side of Christmas was brought home to me the other day when I realised that the cost of a card, wrapping paper, tag and ribbons was more than the value of the present that was being given. How crazy is that? 

Why can’t we make tags out of recycled Christmas cards? The potential savings are endless.

We all have our stories of unnecessary extravagance such as the tale – which I was assured wasn’t apocryphal – about an only child burdened with so many Christmas gifts from his successful parents and their relatives that it was Easter before they were all opened.

How many parents are sensible enough to acquaint children uttering the familiar cry “Oh but Tom’s got one” with life’s realities by saying “We can’t afford to pay that kind of money.”

The other side of not making cuts is that you can be seen to be insensitive by others, and this is true in corporate life. Many companies have felt compelled to reduce their spending on entertaining, Christmas parties and bonuses.

How can a company explain to staff and customers that there is a need to control spending in terms of salary reviews and upgrading facilities if the directors reward themselves with huge bonuses, first-class travel and extravagant Christmas parties?

The Royal Bank of Scotland’s Brindleyplace office in Birmingham recently sacrificed its deposit by cancelling its Christmas party for some 240 staff that was due to be held at Nailcote Hall in Berkswell tomorrow .

The decision resulted in a loss of income for owner Rick Cresswell during the well-known Warwickshire country hotel’s key period of the year. But it is a little difficult to get into the festive spirit with your work colleagues with a clear conscience when the banking world has been put in the dock as a main instigator of the credit crunch and many thousands have lost their jobs in your field, including some in your own bank.

So, yes, we are all in a difficult financial environment but let’s not be embarrassed about it. Let’s turn it to our advantage and use it as the perfect excuse to blame others for actions that we have needed to take for a long time.

n??Trevor Law is a director with Montpelier Group (Europe) Ltd, the privately-owned independent financial advisers located at Barston near Solihull.