Not too late to rein in the Christmas spending, says financial guru
The warning bells are ringing but are you listening?
As the Christmas shopping season hits its busiest time this week, financial advisers are urging Canadians to keep their spending under control.
The lure of shiny presents, and impressing relatives, can be too much for many people. The average Canadian plans to spend $643 on the holidays, a new study says, only days after Statistics Canada reported on a high debt-to-disposable-income level.
For every $1 of disposable income the average household has, it also carried $1.78 in credit market debt in the third quarter.
Yes, you're right. That math doesn't add up.
But it's not surprising for Tammy Johnston, personal finance educator and author of the Financial Foundations series.
"The expenses for everything are going up: your phone bill, your property taxes, your utilities, groceries," she told the Calgary Eyeopener on Monday. "It doesn't seem like a lot but it keeps adding up and adding up, and, unfortunately, wages are not going up."
And if you're dealing with or recovering from a recent job loss, those expenses, and expectations, are harder to meet.
So in the spirit of the season, Johnston has offered a few tips to keep things under control.
Cheaper gifts
It's not just housing expenses that are on the rise. Today's kids are asking for more expensive gifts than you likely received as a child.
"It has been a shift because there's a lot more, like the electronics," Johnston said. "When I was young kid, like getting a doll was a really big deal. Now kids are expecting like iPads and Nintendo DS, Switches and stuff like that, which are hundreds of dollars."
As with any gift, she suggests to think about whether the person you're buying for actually needs it — and if they'll use it.
You don't want that expensive present ending up in the trash or left untouched a few weeks after being unwrapped.
Pay in cash
Paying with cash makes you feel every expenditure, Johnston says.
"It makes you very aware. It makes you plan out what you're going to be doing," she said.
Paying with credit card — especially using the automatic tap function — helps you ignore the money flowing out of your pocket, she said.
And it delays the pain. All those buy-now-pay-later schemes and the growing list of transactions on your credit card will come due eventually, and likely with interest.
Plan it out
The best thing to do is to plan out your shopping and stick to it.
Set a budget for what you want to spend on each person, rather than Christmas overall. Also, consider starting a Christmas gift exchange if you have a larger extended family.
"How many gifts have you given and how many gifts have you received that were obligatory that basically hit the garbage the next day," Johnston says. "What a total complete waste of time, effort and money."
Some people find shopping online helps them stick to their plan, she says, and avoid impulse purchases that may come while in-store shopping.
Save for next year
It might be too late to make these changes this year but start thinking about next year, Johnston says.
Learn from your mistakes and set a budget.
"You put that money aside literally every single paycheck into a separate account so that when Christmas comes, it's there and you're not stressing," she said.
Track that spending
January is coming, and so are those bills. Start planning now to make the blow a little softer, Johnston said.
Put together a working budget and watch your spending. This could be on a money-tracking app, a spreadsheet or an old-fashioned notebook.
On average, Johnston said, she can find a minimum of $200 a month that a family is bleeding, from extra fees on credit cards to forgotten subscriptions.
"It's not 'money out bad' because we need to spend money for things like our housing and food itself," she said. "Is it being spent wisely and effectively, rather than just thrown away?"
It's hard to make time for this but Johnston stresses a once-a-week check-in will pay off.
With files from the Calgary Eyeopener.
