CHRISTMAS CRUNCH
How to skate through the holidays debt-free,
One thing I’ve learned from years of budgeting and tracking my spending is how to plan for annual one-time expenses. It’s cheaper to pay our $1,000 home insurance bill in one shot, so I set aside $83 every month until it’s due. I know we spent $600 on Christmas gifts last year, so I’ll put away $50 per month for a year to avoid the big hit in December.
That type of planning makes it easier to save, which helps you manage your cash flow.
Still, many of us prefer to live in the moment and when back-to-school arrives, Halloween creeps up or that property tax bill comes due, we might have to resort to credit to get by
survey commissioned by credit agency TransUnion found that nearly two-thirds of Canadians go into the holiday shopping season without any savings. That means credit cards, new lines of credit and extra debt at Christmas.
There are plenty of reasons why people don’t save. It can start when you rationalize your holiday indulgences by saying you’ll pay it off when your raise kicks in at the beginning of the year.
Or when you get a year-end bonus. When you don’t get a raise or a bonus, you don’t fret because there’s still a chance you’ll get a tax refund in April.
Pretty soon it’s summer and while you should be planning and saving for the coming holiday season, you’re still trying to pay off last year’s purchases. Carrying a running credit card balance erodes your finances and, if left unchecked, can eventually derail your retirement plans. A CIBC poll found that more than half of seniors are retiring with debt, 39 per cent of which is on a credit card.
Budgeting and tracking spending is a painstaking chore, but a necessary one when you have trouble managing your money. Tracking expenses gives you a detailed history of what you have been spending, which can give you a good idea of how to budget for the future.
That makes saving simple — just take that spending amount and divide it by the number of paycheques you’ll receive before the expense comes due again.
So even if I get off to a late start saving for Christmas presents this year, I know I’ll get paid four more times before the end of the year. If I save $150 per paycheque and then stick to my $600 budget I can skate through the holiday season debtfree. Robb Engen blogs at Boomer & Echo. Reach him at robbengen@gmail.com