Holiday | Personal Finance

10 tips to avoid the post-holiday finance blues

With the festive season upon us, it’s easy to overspend. But you can enjoy the holidays without breaking the bank.

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Man's hand about to hit ceramic coin piggy bank with sledge hammer on a festive background“Christmas is a little like the start of the school year,” says Isabelle Dauphin, a budget consultant with ACEF. “Too many people are caught off-guard every year. They don’t plan for these expenses, even though they’re not unexpected.”

With all the gifts, dinners and sales, the most wonderful time of the year can hit your wallet hard. Keep your spending in check with these tips and you won’t regret it in January.

1. Pause before you act. Take some time to think about how you fared this time last year. “It will help you avoid getting caught up in the holiday frenzy or panicking with last-minute shopping,” says Isabelle Dauphin, a budget consultant with ACEF, a family savings cooperative association in Montreal.

“Under such circumstances, it’s easy to make bad decisions instead of keeping it simple, reusing items you have at home or giving more of yourself,” says Dauphin. “People with lower incomes have been doing this for a long time out of necessity, but the movement is gaining broader appeal.”

2. Set a budget and stick to it.  According to CPA Canada’s annual Holiday Spending Survey, only 39 per cent of Canadians save all year for their holiday purchases. Follow their lead, and the New Year will be a lot less painful. Don’t forget to include gifts, food and travel in your budget.

“Christmas is a little like the start of the school year,” Dauphin adds. “Too many people are caught off-guard every year. They don’t plan for these expenses, even though they’re not unexpected.” 

3. Avoid credit at all costs. The grace period for not paying interest on a credit card balance is generally 21 days, making for a rude awakening come January—especially with interest rates nearing 20 per cent.

“Store credit cards are the worst. They may offer discounts on purchases, but interest rates can be as high as 30 per cent,” says Dauphin. “People are pulled in by the immediate discount, but it quickly disappears in interest paid if they don’t pay off their balances in full.” 

Don’t forget, each new card application affects your credit score. Prioritize debit payments as much as possible. Although most merchants don’t charge a fee when you pay by debit (they may require that you make a minimum purchase), “in some cases, you may need to pay a convenience fee for the use of the payment terminal when you pay with your debit card in-store,” explains the Financial Consumer Agency of Canada. To avoid these fees, ask if the merchant accepts another form of payment, such as cash or cheque, or find a vendor who doesn’t charge for debit payments.

4. Use an app to track your spending in real time. You can change course right away if you’re about to go over budget (expected to be $583 on average this year, according to the CPA Canada survey).

“Tracking is essential. It’s so easy to succumb to the holiday magic—and marketing,” says Dauphin. “Even if you’ve set yourself limits, all it takes is an invitation, or guests, for spending to get out of control,” says Dauphin.

5. Be creative and responsible. The people you care about don’t want you to go into debt for them. Instead, focus on what they really need. A few frozen meals? Babysitting? A lift to an appointment? Help with minor repairs? 

“People often try to make up for not having enough time for their loved ones with presents, but that’s not how it works,” Dauphin says. “Your time is probably the most precious gift you can offer.”

6. Give younger kids experiences, not stuff. Children don’t need gadgets or loads of toys. Why not sign them up for a sport, or get them tickets to a game or a show? 

7. Set clear rules for adults before parties begin. Again, be responsible. “Don’t spend too much on a new outfit for such short, albeit fun, events,” says Dauphin. Set price limits for gift exchanges. Participate in the second-hand economy—after all, it’s the thought that counts. You don’t have to go to every party, and if you’re the host, you can ask your guests to pitch in with food or cash.

8. Resist the temptation to shop. Sales, like those on Boxing Day, are a bargain-hunter’s delight. The truth is, many discounted items can be found cheaper or at the same price at other times of the year.

“You have to have incredible willpower to resist the pressure to impulse buy, and not fall for these bogus discounts,” admits Dauphin. “Similarly, giving gifts can feel like an obligation. Just look at all the stuff for sale on Kijiji the day after Christmas!”

9. If possible, travel at another time of year. Prices are at their highest during the holidays, unless you book very early or go to a less popular destination. If you’ve accumulated points with different loyalty cards for groceries and gas, now is the time to use them.

10. Take full advantage of your company benefits. “Make the most of your group insurance coverage [like dental care], by submitting any valid claims before December 31. And don’t forget about employee purchase and discount programs,” advises Dauphin.