Holiday hangover as Christmas bills come due
SYDNEY — It’s not the lack of sun, the pandemic or cold temperatures bringing many people down these days but rather the arrival of credit card bills outlining Christmas purchases and the reality of debt that comes with them.
Despite best efforts, indications are that consumers spent as usual this holiday season and are now facing the standard payback with the added pressures of a pandemic influenced economy.
Credit Counselling Services of Atlantic Canada released information this week suggesting that a slight rise in holiday shopping might soon be revealed after parents felt the need to offset a bad year by making Christmas extra special for families, which only made tough financial times a bit worse.
The BDO Canada Affordability Index showed about 40 per cent of Canadians are worse off since the pandemic began, making the 2020 holidays much different than the years before COVID-19.
But despite this — polls showed many were willing to spend to improve their moods — even if it meant taking on debt. And now those holiday bills are coming due.
“What I saw was people embracing the holidays,” said Len Shaw, a BDO Canada senior vice-president.
“I didn’t see any key indicators to know how much it is up over last year but even driving around in Sydney you could see more people had lights on earlier and longer and people were really embracing the holidays this year for a sense of normalcy.”
DEBT HANGOVER
Many who embraced Christmas are now experiencing what Shaw referred to as a ‘debt hangover’ from the holidays and they need to take inventory of their debt and develop a plan to pay it down. That means reining in finances by tightening up the budget.
“If Christmas got away from people for whatever reason, if their spending got a little out of control or if things just got ahead of them, it is important now to have a plan. If you have a plan and can bounce back from it in a few months, that is great, but a lot of people are going to have to (find) a longer-term plan to try to get control of that debt.”
Shaw said your plan should include knowing the exact income coming into the household each month, knowing your expenses and where you can cut them to make room for debt repayment so that you can pay a little bit of it down each month.
If you used credit to make your Christmas merry, Shaw said now is the time to stop using those credit cards for a while so that you can get ahead of the payments.
It’s not time to do anything extreme, though, no matter what the financial situation.
Debt consolidation, fixed payment plans and consumer proposals are among the options to get finances back on track.
“When you show them that, they say I don’t have to sell my house anymore. There are other ways to fix it other than a bankruptcy.”
CERB DEBT
The pandemic also brought with it new debt-related issues about the Canada Emergency Response Benefit (CERB) and paying back taxes on these monthly CERB payments may become an added stress for some. There are others who received payments despite being ineligible and they must now pay that money back.
Shaw encouraged all to reach out to the Canada Revenue Agency for advice on payback options because the federal agency has advised it will work with people on a case-by-case basis.
The legislation for CERB doesn’t specifically say whether it can or can’t be included in a bankruptcy or proposal, he said. However, most income tax can be dealt with in a bankruptcy.
“Any debt derived by misrepresentation or fraud, if you collect it and knew you were ineligible, it is possible the government may try to oppose your discharge. If it was an honest mistake, you felt you were entitled to it and you were acting honestly and needed that help, it is likely they would be more forgiving that way.”
STASHING CASH
While many are facing extreme debt at this time of year, a report from CIBC last week estimated that Canadians are sitting atop $90 billion in excess cash — the highest in the country’s history.
An emergency fund was part of advice Shaw issued to clients and others when the pandemic broke out in March 2020.
The resulting cash stash came from travel plans put on hold, cancelled concerts and other big-ticket excursions and he was glad to see some able to do that.
DON’T GIVE UP
For those unable to build a cash stash, he reiterated advice to focus on a budget and then to tighten it up.
“If it is so insurmountable, don’t be too afraid to ask for help. There is help available. I always tell people there’s always a way to fix a financial problem. Just ask for help. Debt is so easy to fix. There’s way to fix it so if you are in over your head, don’t be afraid to ask for help. There’s no judgment in that.”