Keep Your Finances Happy This Holiday Season

Keep Your Finances Happy This Holiday Season

December is fast approaching. You know what that means. As every day passes, malls are getting increasingly crowded, you’re beginning to hear the same few Mariah Carey and Michael Bublé holiday songs blasting through the intercom, and everywhere you look you see two-foot-long receipts, swipe after swipe of bank cards, and so many people spending so much money.
 
The holiday season is known to be the most magical time of the year – one filled with joy, love, and generosity. As an expression of love and gratitude, the season has also evolved to feature gift-giving as a central component of it. While this is not necessarily a bad thing, whatsoever, it is important to ensure that you (and your bank accounts) do not become overwhelmed with buying the perfect gifts for your friends and family.
 
Even in the face of depressed economic conditions due to recent trade uncertainty and climbing debt levels, an annual survey by PWC suggests that Canadian consumers’ holiday spirits are not dampened, as people intend to spend as much or more this holiday season as they did last year. Further, another report done by Leger for the Retail Council of Canada (RCC) reveals that thirty-five percent of Canadians said they ended up spending more money than they planned to last holiday season.
 
To avoid spending more money than you intend to (and can afford to), check out these holiday-spending tips that I’ve compiled. These tips aim to help take the financial stress out of the holiday season so you can focus on the things that truly matter.
 
 
Go in With a Game Plan
 
This may seem like an obvious tip, but the importance of having a holiday shopping game plan cannot be underestimated. As a strong starting point, your gift budget should reflect what you can afford, rather than the size of your family and circle of friends.
 
With this in mind, think of your list. If you don’t create a concise list, everything and everyone will end up on your list. We all know how dangerous that can be for our credit cards. So, given your budget, are you going to buy more expensive gifts for fewer people? Or smaller gifts for an extended group of people?
 
Once you have determined who is on your shopping list and what you want to gift them, write it down. The flashy lights of sale signs in shop windows and the beautifully adorned gift baskets on showcase are meant to pull you off your game plan and make you spend more money than you wanted or needed to. Writing down your list keeps you on track and minimizes impulse purchases.
 
Keeping a written tab after you purchase each item is also a helpful thing to do. By writing your purchases down, you are compiling a master list of your holiday expenses that allow you to closely track the exact amount you are spending so you can remain on budget.
 
 
Do Your Research
 
Once you have your game plan in order, it’s time to take to the internet to do some research. Scoping out purchases in advance not only allows you to figure out where to buy your gifts, but also see if there are any outlet stores, coupons or sales you can take advantage of. Looking online will allow you to seek out suitable alternatives that may be cheaper, as well. The internet is your friend this holiday season!
 
 
Buy According to Your Financial Situation
 
In the spirit of generosity, people tend to lose sight of their financial situation. Especially if you are in a precarious financial situation, the holiday season can leave you with feelings of heightened stress or inadequacy. Keep in mind, however, in no way are you expected to, nor should, spend beyond your means. Just because Jimmy has upped his gift-giving game because of that awesome promotion he received this year, it doesn’t mean you have to, as well.
 
While it is easy to get swept up in the materialism of it all, the holidays are not about who can buy the fanciest gifts. If you still have debts that you’re working to pay back, there is no need to go crazy buying expensive gifts that will harm your ability to stay on your debt repayment schedule. In reality, too, your loved ones wouldn’t want you to be under greater financial stress, either.
 
Thoughtful, personalized gifts, rather than expensive ones, always mean the most. When you’re brainstorming your shopping list, think of who you are buying for, and how your gift can align with what they love.
 
 
Giving Doesn’t Have to Have a Dollar Value
 
In line with brainstorming what to get your family and friends, keep in mind different thoughtful, personalized ways you can express your love without spending money. Your budget may only allow for you to purchase gifts for your parents and siblings. By baking a couple dozen homemade cookies, you can still spread holiday cheer to extended family and friends without breaking the bank. Get creative with it - make them something homemade, do an activity with them, give your time in act of service together.
 
For example, rather than getting your outdoorsy brother a nice new dress shirt, plan a camping trip that the two of you can take together. This way, you get to save money while making unforgettable memories together while doing something that is important to him.
 
 
Given the above considerations, how much is a reasonable total to spend on holiday gift-giving?
 
The 1% Rule
 
As with all financial decisions, setting a total limit on how much you are willing to spend over the holidays is a highly personal decision.
 
While personal finance experts argue over how much is an appropriate amount to spend at holiday time, a good rule of thumb for middle-class Canadians is to keep the gift budget around one percent of pre-tax income. This number will vary slightly depending on your personal and financial priorities, but is a suitable benchmark to ensure you aren’t spending beyond your means.
 
Another tip to ensure you avoid digging yourself into debt, is to ensure that your spending does not exceed the amount of money that you have left over at the end of any given month after you pay all your bills. A good saying to keep in mind: use cash, not cash advances. By purchasing your gifts with cash or debit, or in other words – money that you currently have, you are safeguarding yourself against escalating debt. You should not be sacrificing your credit score or be taking on more debt in order to buy gifts.
 
If you do find yourself wanting to indulge a bit and spend more over the holiday season, consider swapping out another monthly discretionary expense to cover the cost. For example, consider not spending any of the money you allot each month on clothing purchases, and redirect it towards your holiday fund. Just make sure that once you set your holiday budget, you commit to sticking to it. 
 
 
More Strategies
 
Cash back rewards. An interesting strategy that I’ve come across for holiday budgeting utilizes a credit card cash-back rewards program. If you have a cash-back credit card that you use for regular spending throughout the year, make an effort to reserve all the cash that you get back from the program for your holiday fund. This way, your holiday shopping, in full or in part, can be done with essentially free money.
 
Monthly contributions. By taking a proactive approach, you can lighten the financial burden that accompanies the holiday season. If you start in January, setting aside a mere $50 a month into a holiday fund, will give you $600 that you can spend on holiday shopping. You won’t even realize the $50 is gone every month, but it will save you from the shock of a depleting bank account in December.
 
 
The Bottom Line
 
The holiday season may seem far away, but don’t be fooled - it is approaching faster than you think. Even with a very tight budget, there are countless ways to spread holiday cheer and avoid becoming the Scrooge that robs the joy from your holiday season. Create a thorough plan, base your gift-giving on sentiment rather than dollar value, spend quality time with friends and family, and remain vigilant about staying on budget to avoid a debt-induced headache come January.
 
By being proactive and getting ahead of your holiday shopping, you are allowing yourself the opportunity to truly enjoy December’s festivities with less stress, more time, and a greater understanding of where your finances stand. We hope these tips help you to get through the holidays without spending a fortune.
 
On behalf of the Bongard Wealth Advisory Group, happy shopping and happy holidays!