The Christmas credit-fest is upon us! The malls are all bustling; the cash registers are ringing. It is, quite simply, the most stressful time of the year.
Or it can be for those of us who neglect to plan for the season. “Christmas is not an emergency or something that happens out of the blue,” says Tannya McBride, JR Shaw School of Business finance instructor and a Certified Financial Planner. “But people still fail to budget for it.”
So how do you trade the stress for wonder, and get back to focusing on friends, family and festivities? Mostly, it’s a matter of exercising financial discipline, before, during and after Christmas, says the Bachelor of Applied Business Administration - Finance grad (class of ’07). Here she explains how.
Make a list
When you go to the mall, says McBride, all you see is “sale, sale, sale, and then you end up buying things you don’t need.” A list keeps you focused. For next season, act on ideas you gather throughout the year to lessen the impact on our accounts come January.
Set a budget
“Mistake Number 1 is not having a budget.” Mistake Number 2, then, is not sticking to one you do have. If you’ve only allotted $50 for your sister but that perfect sweater is $75, “Let it go, and find something in your price range.”
What’s another $25, you ask? If so, you’re forgetting that “Christmas holidays are expensive,” says McBride. Gifts are only part of it; costs also come with cards, postage (save this with an e-card, suggests McBride), food and drink, decorations, travel expenses and other oft-overlooked festive frivolities.
Go cyber shopping
If you do buy online, “Be careful,” says McBride. “Especially around Christmas – and Black Friday and Cyber Monday – a lot of fake websites pop up.” Know your retailer, check the URL for anomalies. Protect yourself with a free PayPal account, she adds, which prevents sharing credit card info directly with sellers.
Know your retailer, check the URL for anomalies.
Cash and carry
Whenever possible, “Avoid credit cards,” says McBride – especially those issued by department stores, which she’s seen charge as much as 29 per cent. Even with conventional cards, spending to excess is easy since expenses don’t immediately affect your bank balance, leading to a nasty holiday hangover. Stick to cash.
Stay on track
Monitor your money. How much have you spent? How quickly? “It’s an eye-opening experience. Nobody really takes the time to sit down and add it up.”
Mostly, that’s because keeping tabs on cash is tricky. To make it easier, McBride uses mint.com, a web-based and mobile money-tracking app that connects directly to your accounts. Let technology help keep your finances front of mind, but prevent them from weigh too heavily upon it.
A penny saved
It’s too late now to start socking away anything but stocking stuffers, but consider your Christmas expense report the starting point of your plan for next year. Make what you spent this season your goal. “Start in January and allocate a little bit of money every month,” says McBride.
Consider your Christmas expense report the starting point of your plan for next year.
Start a separate savings account (perhaps even a TFSA, she says) that will be easy to access. Not too easy, mind you – you don’t want to be tempted to dip into it. Don’t connect it to your debit card.
Pay it back
Say you use a department store card with a 29 per cent rate of compounding interest and spend $1,000. If, by the following Christmas, you “don’t manage to pay down the debt,” says McBride, “you’re paying $1,300 or more.”
Pay less by transferring the debt to a lower-interest line of credit. Set up a monthly payment plan. Or, put your income tax return to good use. “Most people think of it as a bonus, but [paying down] debt should be a priority,” says McBride – especially if, come December, you want to focus on enjoying the real reason for the season.