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A merry (debt-free) Christmas

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Guest blogger Leanne Salyzyn is an insolvency counselor, licensed restructuring professional and trustee in bankruptcy. Post a comment or contact her on Twitter with your personal-finance questions.

With less than a month to go before Christmas and, for most, only two pay periods away from the big day, are you ready? Merchants have certainly been ready since September. Their shelves are brimming with items to tempt us to spend. The average Canadian spends upwards of $800 on holiday spending, which will take a bite out of most budgets.

But with rising household debt levels and slower job growth, many families will feel more anxiety this Christmas than the last. Before you get caught up in the moment and find yourself carried away with the shopping frenzy like most do, consider these smart holiday spending tips.

Create a Holiday Spending Plan

A goal without a plan is a wish. Imagine making a four-course Christmas dinner and you forgetting your list when you go to the grocery store. You will certainly forget some items, which means making another trip to the store later. You will certainly buy items you didn’t need, causing you to overspend. Holiday spending is the same. Make a list of everyone you intend to buy gifts for, including babysitters, teachers, and even neighbours. Assign a dollar value next to each name and a gift suggestion. Make a list of all holiday items such as gift wrap, cards, decorations, Christmas groceries and alcohol. Again, assign a dollar value next to each item. Review the plan before you spend and cross off the person/item when the money is spent. Stick to your plan and do not continue shopping once crossed off the list.

Keeping up with the Joneses

We all have a spending threshold. Know yours. Your friends, family, colleagues and acquaintances may have another threshold that is very different from yours. Knowing the difference and acknowledging that you are not them makes staying within your budget possible. Remember you are accountable for your own personal finances. Life is not a contest. Our kids want everything. Most parents can’t afford to give them everything nor should we. As adults, we don’t get everything we want. This is an important life lesson. Saying “no,” although difficult, teaches self-control and reason. The gift will long be forgotten in a few weeks, but the thought that you appreciated them enough to buy them something in the first place is what counts.

Have “The Talk”

Talking about money is still taboo for most families. The sooner we face this, the easier life becomes. Discuss with family/friends if presents for everyone is necessary this year. Cutting down the gift list can save everyone time and money. Perhaps, you buy only gifts for the kids and forgo buying for your siblings. Many families limit gifts to a certain dollar value, draw names and only buy one “family” gift. We all love to have something to open on Christmas morning, but keep it realistic. It’s more about the giving than the gift.

Cash vs. Credit

Credit does afford us many benefits. Items bought today can be paid for later. This can help with the immediate cash crunch many feel around the month of December. Most credit cards offer point incentives for travel, which can be gifts in the future. That being said, most consumers overspend on their holiday spending plan when paying on credit. It’s as if they have additional income instead of extra debt. If you are already struggling to pay your monthly expenses without the additional expense of the holidays, chances are you will not be able to pay off those Christmas expenses in January. This will cost you extra in the form of interest charges. Cash is king. No bills in January. No extra interest costs. If you don’t have it, don’t spend it. Sure, it would be great to have those extra travel points, but you won’t be able to afford to go anywhere for a while if you incur unnecessary debt.

Finally, sit back, relax and enjoy all you have accomplished knowing the Christmas expenses are done for another 365 days.

 

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