December 10, 2015 3:36 pm
Updated: December 10, 2015 5:02 pm

‘Debtcember’? 5 tips to avoid racking up holiday debt

Don't let the excitement of the holidays leave you with a financial hungover in January.

Photo by Adam Berry/Getty Images

From Christmas presents to party primping and home decorating – the holiday season can be a pricey time. There are simple things you can do, though, to keep your spending in check so you’re not seeing red after the buzz of the festivities wears off.

“I kind of call December ‘Debtcember’ because people tend to overspend,” said Chantel Chapman, a financial fitness coach at Mogo, which tries to get people to free themselves of credit cards.

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“I don’t think a lot of people think of the holidays as something they have to save for like a trip. They just think, ‘Oh I’ll put these extra things on my credit card and I’ll just deal with it after.'”

If you’re guilty of not planning ahead, don’t worry. You still have a chance of getting through the holidays without doing too much damage if you follow these tips.

1. Have a budget before going in

This is always rule number one.

If you don’t do this, Chapman compared it to going to the grocery store when you’re hungry.

“Why would you do that? It’s the same thing.”

Even with a budget, prepare for stores to try to lure you into buying more.

“Retailers definitely encourage impulse purchasing,” consumer psychologist Dr. Kit Yarrow of Golden Gate University recently told us.

Everything from product placement to store layout can be used to encourage spending.

“Whether it’s smells, or free tastes, or how something feels — even things like how squishy the carpet is below our feet — these things actually have a great impact in how long…we want to linger in a store and how willing we are to spend more,” she explained.

READ MORE: Psychology of an impulse buy: how stores manipulate you to spend more

“You have to outsmart the marketers,” Chapman said.

“If you outsmart the marketers and outsmart the credit card companies when you go in to do your holiday shopping, I think you’ll be good.”

Being aware of retailers’ tactics and the consequences of racking up your credit card is an important first step. Avoiding last-minute shopping can also help.

2. Put things into perspective

Another way to curb overspending could be to think of other ways that money could be spent.

“I think of how many people in need I could feed with that amount of money,” Chapman said.

“So it kind of puts things into perspective and it’s very sobering to look at it like that.”

Another alternative could be just to think of how else you could use that money. Perhaps you’ve been dreaming of a winter getaway, or maybe you’re trying to save for your own home. Always keep your eye on the prize.

Chapman also suggested you ask yourself what value you get from overspending.

“Everyone’s like keeping up with the Jones and trying to keep up with the Kardashians and overspending. And overall, it’s not fulfilling in the end.”

“Sometimes we’ll go and buy something expensive that we could’ve gotten a less expensive version of.”

We can fall into this trap when we buy wine as a present, for example. We don’t want to seem cheap so we go for the expensive bottle.

If you need a reason not to do that, numerous studies have found people actually tend to prefer the taste of cheaper wine.

3. Give the gift of time

You don’t need to spend a lot of money, or any money at all, to make a lasting impression with your gift.

“People value time and people remember experiences over things,” Chapman said.

Research has backed that up. Psychology professor Tom Gilovich of Cornell University has spent years studying the phenomenon.

“When you share an experience with someone, you just feel more connected with them,” he explained.

So if you’re looking for the best gift to buy your friends or your family, consider planning a family outing to go tobogganing or skating.

Or take your friend to a show.

4. Don’t get close to your credit card limit

Chapman recommended you always leave a 30 per cent buffer on your credit card.

“If you rack up your credit card this December all the way to the max limit, even if you pay it off, what will happen is your credit score will drop.”

READ MORE: What affects your credit rating and how can you improve it

Other financial experts have advised not letting your credit card balance go over 50 per cent of your available limit.

5. Think about the interest costs

If you are putting things on credit, make sure to think about how much they’ll actually cost you in the long run (you can use this free debt calculator).

That sweet deal you get on Boxing Day could end up costing you double and take years to pay off if you just make the minimum payment.


Credit: Consolidated Credit Counseling Services of Canada

For those who just can’t help themselves and end up with heft credit card bills in January, Chapman suggested getting a personal loan to pay them off.

“You have this boundary on a loan, where every payment you make you’re not allowed to reborrow it,” she said.

“So there’s an end to being in debt, versus with a credit card you could essentially be in debt forever.”

© 2015 Shaw Media

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