Avoid holiday hangover with a gift-buying plan
If you want to change your overspending ways, start by looking at how you shopped last year
With the festive season fast approaching, there’s no time like now to start planning if you’re going to make it to Jan. 1 without breaking the bank.
Setting — and sticking to — a holiday budget can be challenging, so I decided to consult the experts: Sandra Hanna, financial guru and CEO of personal-finance website Smartcookies.com; and Scott Hannah, president and CEO of the Credit Counselling Society (nomoredebts.org). They shared their tips on how to escape the holiday hangover this year. Look at the past: If you want to change your overspending ways, Hannah recommends looking at your shopping habits during the holiday season last year. Reflecting on the past can show you what you did right — and where you went off track.
“Having time to reflect on last year allows people to think about what they would change this year,” he explains.
“People get into a trend of overspending at Christmastime, working the whole rest of the year trying to pay it off, and overspending again at Christmastime. The only way to break the cycle is to make some changes.”
Going to a concert? Don’t forget about taxi fares, dry-cleaning fees and paying a babysitter. Be aware of all your spending — not just the big-ticket items. Make a budget: When it comes to gift exchanges, setting a limit is critical to avoid spending money you don’t have.
“A lot of studies show that if there’s no budget or guideline in place, you end up spending more,” says Hannah, adding that this can be dangerous if you are using money you don’t have.
“If you use credit and repay debt over a period of time, you may find the holiday season actually costs you 50 per cent more.” Try the four-gift rule: When shopping for her family, Hanna uses the four-gift rule. The simple premise is that only four gifts can be purchased for each person: something they’re wishing for, something they need, something they can wear, and something they can read.
“It’s really easy to go overboard for kids and spouses, so the four-gift rule is great,” she says. “It makes it easier to keep the spending in check — and you can make your own categories.”
Create new traditions: Ever find yourself exchanging gifts with work colleagues or friends and wishing you weren’t? If this sounds familiar, it might be time to make new traditions.
“We all know those times when we’ve been exchanging gifts with people and you think, ‘Do I need to exchange gifts with my friends when we’re all broke?’ ” says Hannah. “Everyone’s thinking about it, but very few people want to talk about it.”
Be creative and suggest a new, lower-cost way to celebrate. Instead of buying gifts for everyone, try a Secret Santa. If you overspend on fancy dinners out, consider hosting a potluck. Chances are everyone will thank you for it. Track your spending: Have trouble keeping track of what you’ve paid out? Fasten a piece of paper around your credit card with your budget on it, and subtract each time you make a purchase. Or bring a calculator. Or join the 21st century and use the calculator or an app on your phone. Whatever method you choose, tracking your spending can save money in the long run by raising awareness and reminding you when you’ve reached your limit.
Hanna recommends the free app Santa’s Bag, which helps you keep track of what each person on your list wants, what you’ve purchased and where you’re at with your budget. Make a list (and check it twice): Knowing exactly who you’re shop- ping for, what you’re looking for and the maximum amount you’re willing to spend is key to avoiding the holiday hangover. “People often roll their eyes at it, but making your list is one of the most important things you can do — and the earlier, the better,” Hanna says.
Once her list is made, the financial guru uses retailmenot.ca, a website that collects deals from major retailers that can be used online or instore.
“If you go to a website like that without a list, you’ll start buying everything you didn’t intend to buy,” she says, chuckling. “But if you go in and say, ‘OK, this is what I need and this is what I’m looking for,’ you’ll be prepared — and get a good deal.” Cut costs now: Hannah suggests cutting costs in your daily life now to offset bigger bills in December. Packing a lunch for work instead of eating out and limiting your latte intake can save you several hundred dollars — money you can put toward holiday costs. Avoid credit cards: If you have difficulty sticking to a budget, Hannah advises avoiding credit cards at all costs and using cash instead.
“The temptation is just too high to spend more than what your budget allows as opposed to a cash budget,” he says.
And it’s never too early to think ahead: Next year, set aside10 per cent of your holiday budget each month, and by the end of October you’ll have your entire holiday spending budget in your savings account.