December 2, 2015 10:00 pm
Updated: December 4, 2015 2:21 pm

Season of giving and spending: how to stay on budget

WATCH: Our Consumer Matters reporter Anne Drewa has some expert advice on how to avoid taking the Christmas train to the poorhouse.


Black Friday is the unofficial kick off to holiday shopping and that means Canadians are under more serious financial pressure. Christmas is on its way, and no doubt it’s easy to stray from your budget. It seems there’s always gifts to buy, food to make, and parties to attend, which can all add up.

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Canadians are expected to spend an average of $1,551 this holiday season, up from $1,517 in 2014, according to a recent BMO survey. The survey also reveals we will spend $563 on gifts, $686 on travel and $228 on holiday entertaining.Christmas holiday season can be a time when people get caught up in the euphoria and end up blowing their budgets.

If you haven’t starting saving, here are some financial recommendations on how you should approach the season of giving — and spending.

Have a budget:

“One of the most important things for people to do is to have an overall holiday budget. And not just for gifts but for everything. If you are going to be entertaining or if you’re going to parties, events,” says Scott Hannah, the president and CEO of the Credit Counselling Society of Canada. The number one problem, he says, is most people are not budgeting and are not setting realistic goals.

Hannah says your overall budget needs to fit with your lifestyle and economic situation. Consumers, he says, need to resist the temptation of living up to their friends and family who may earn more income.

Track your expenditures:

While you’re spending your money, Hannah says, make sure you are tracking your expenditures as you go along.

“If you’ve got a budget, make a list of who you are buying for, every time you buy a gift check it off your list and see how much is left in your overall spending plan.”

“Keeping track of that will keep your budget in line and you’ll have less of a holiday hangover in the New Year,” he adds.

Instead of buying gifts for everyone this year, Hannah encourages consumers to plan a Christmas gift draw with friends and family. Remember gifts are not about how much you spend, but about personalizing it.

“It’s surprising that it just takes that one person to make those suggestions and everyone says ‘that’s a great idea’. It’s less stressful. It’s one gift versus ten. We’re all going to save a lot of money and have a lot of fun at the same time.”

A recent TD Canada Trust survey found over one-third of Canadians who do most of their holiday shopping online are more likely to say they spend more than they would in store. And 86 per cent use credit cards as a quick way to pay for their purchases.

Cut down on credit card use:

Hannah’s third tip is to use cash or debit this holiday season.

“Avoid using your credit card this holiday season. Credit cards can add as much as 50 per cent on top of the price of the gift if you’re paying it over a period of time.”

If you’re tempted by the low interest rates, Hannah says keep debt to a minimal and only take on debt that you could afford to pay off in the first three months of the new year.

“The important thing here is taking on debt means that you have to pay it back.”

Household debt to disposable income rose 164.6% in the second quarter of this year, according to Statistic Canada.

Do your research:

Before making a purchase, Hannah recommends doing price comparison shopping online until you find the best possible deal.

If you decide to shop online to avoid the madness of the mall, make sure you not only compare prices, but take into account shopping and exchange rates in your calculations. It’s best to avoid malls when they are extremely busy because people tend to give into impulse shopping, a bad move when you’re trying to stay on budget.

“By doing your homework ahead of time you can save as much as 10 to 50 per cent on a gift item. That really adds up of course for a number of items,” says Hannah.

In addition to the gift-giving, hosting parties can also be a huge financial strain for consumers. Instead of having a massive party, try organizing a volunteer party.

“We are going to donate a day and volunteer here. We’re going to be together. We’re going to have some fun and at the end of the day we are going to feel good about it.”

Plan for next year’s holiday season this year:

Hannah says many consumers that seek advice from the Credit Counseling Society are still recovering from last year’s Christmas debt. He says it’s never too late to start thinking about next year’s holiday season and putting money aside to prevent going into debt.

“One of the best ways to pay for the holiday season is by setting aside funds each and every single month,” he says.

It’s all about getting a game plan and sticking to it so you can figure out how to resolve the potential financial stress so you can get into the spirit of the season without falling into debt.

© 2015 Shaw Media

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