The holiday season can bring a mix of excitement and stress. While it’s fun to celebrate with loved ones, overspending on gifts and entertainment can result in holiday debt that takes months to pay off.
Here’s what you need to know about financial planning for the holidays to avoid debt and lower your stress.
6 Tips to Avoid Holiday Debt
If you feel pressure to spend beyond your means this holiday season, you’re not alone. Despite financial challenges, Canadians plan to spend an average of $972 over the holidays, according to a survey by Retail Council of Canada (RCC) and Leger. This is up 8% from last year. But, many Canadians are also looking for ways to curb their spending and stick to their holiday budgets.
Licensed Insolvency Trustee (LIT), Matt Fader provides useful strategies for managing holiday expectations and avoiding debt.
1. Manage expectations
Around the holidays, “we fear disappointing the most important people in our lives,” says Fader. “We want to see everyone happy.”
When dealing with kids they often associate happiness with getting what they want. While this is normal, Fader says it’s important to set expectations.
You can do this by telling your kids what’s likely to happen – Santa will bring you one present, and you’ll get two from Mom and Dad and one from Grandma and Grandpa.
By laying it out there, everyone knows what to expect. There’s no letdown if everyone knows what’s going to happen.
2. Make a budget
Don’t wait until November to start saving for the holidays. While it might feel like Christmas sneaks up on you, it’s a predictable expense. This makes it easy to plan for. Setting aside money each month in your budget can help prevent going into debt during the holidays.
To set a budget, estimate how much you want to save for next year. Then, decide how much you want to save each week, every two weeks, or every month, however you get paid. Once you have your number, set up automatic transfers from your paycheque to your holiday savings account.
3. Use cash
Online shopping is a great option because it’s so convenient. You can make a purchase from anywhere at any time. But, for some people, it’s too easy.
If you’re prone to overspending when you shop online, Fader suggests switching to physical cash. He says online shopping lends itself to overspending. Having cash in your hand and being able to see it disappear can make it harder to let go of. Tapping a credit card or clicking a button when holiday shopping online can cause you to lose your connection to money which can result in spending more.
4. Do a gift swap
If you have a big family or group of friends, take the financial pressure off by suggesting a gift swap. Instead of buying individual presents for everyone, plan to purchase one gift. This way you can put a lot of thought into it and make it really special while sticking to your holiday budget.
5. Think about the future
It’s easy to get wrapped up in the moment during the holidays. But before you make another purchase that will put you over budget, try to pause and think about the future.
Fader says you should ask yourself, “What is the consequence of the action?” Will that new device, shirt, or toy you’re about to buy make you feel happy when you’re working an extra shift to pay it off? Will you feel like it was worth it when you’re making credit card payments into the spring?
6. Remember what the holidays are really about
The marketers do a good job of making us believe that the holidays are all about the stuff. While it’s fun to get caught up in the spirit of giving, the gifts aren’t the only thing that makes the holidays special.
If you catch yourself thinking you need more, go back to the basics. Think about what the holidays are really about – being with the people you love, sharing time, experiences, and a good meal.
What makes the holidays special will differ for everyone, but try to focus on the non-material things. Talk to your kids about holiday traditions other than gift-giving. Ask them what experiences they’re most excited about. Do they want to bake cookies, go tobogganing, or stay up late watching movies on Christmas Eve? These are the things you’ll all remember.
Struggling With Holiday Debt? Talk to a Licensed Insolvency Trustee
To avoid holiday debt and enjoy a stress-free festive season, start by managing expectations. You don’t have to overspend to have a happy holiday. Get a plan together and set a realistic budget. Then focus on putting money from each pay cheque into a holiday account. This allows you to enjoy the holidays with your family instead of worrying about how you’re going to pay for everything.
If you’re already dealing with debt and struggling to pay your bills, the holidays can feel extra stressful. But you don’t have to navigate your debt alone. If you need help, contact a LIT at Allan Marshall & Associates for a free, no-obligation consultation. We can assess your finances and help you find a solution so you can enjoy the holidays with your loved ones. When you’re ready, call us at 1-888-371-8900 or complete our online contact form.
For more holiday budgeting tips and strategies to manage holiday expectations, check out Episode 160 of the Debt Matters Podcast with LIT Matt Fader.
