Put down the charge card, and walk away from the register.
Holiday shopping is like a hostage-taking: once you’re in the middle of it, it’s really tough to emerge from the situation unscathed.
RBC found in a recent survey that Canadian gift-givers were planning to spend an average of $640 on gifts — up from $624 last year — and $100 more on other holiday items like entertainment, decorations and travel.
If last year’s trend is repeated, the holiday hangover will be brutal. RBC found that in 2010, one-third of holiday shoppers who went over budget spent an average of $429 more than they intended.
That’s why the Credit Counselling Society of B.C. is urging families to do a bit of planning ahead to avoid the hostile takeover of seasonal overspending and its resulting debt.
Scott Hannah, the president and CEO of the non-profit devoted to helping people get a handle on debt, said people need to keep the pressure to purchase scads of expensive gifts in context.
“No one wants a friend or family member to go into debt just to provide them with a gift,” he said, noting most would decline an expensive present if they knew it was going on a credit card with 28 per cent interest.
The key to financially surviving the holidays, Hannah explained, is setting a budget for spending. It doesn’t need to be a spreadsheet; even a simple list of who you have to shop for and how much you can spend for each person will do. The trick is to keep it with you.
“It’s all about making a conscious decision and then having a plan, and having that plan before you go shopping.
I suspect that jewelry stores love guys on the 22nd, 23rd and 24th, because they’re like a doe in the headlights of a car. What do I get? Where do I sign? It’s like shooting fish in the barrel,” he said, adding knowledge is critical. “Keep a running total of how much you’re spending, and keep that with you.”
Ideally the budgeting begins in January, but Hannah knows that isn’t always the case. He said in the last half of the year, many families get caught in a spending cycling, with holidays wrapping up in summer morphing into back-to-school shopping, then sports registrations when Christmas comes knocking on their door.
“Christmas has happened every year for the last 2,010 years, and hopefully it will continue for the next 2,000 years. You can either plan for it, or react to it. It’s a lot easier to set aside $100 a month rather than come up with $1,200 in one month,” he said, noting that many give up around the holidays and let credit cards pick up the slack. “We strongly advocate you should spend no more on your credit cards than you can comfortably afford to pay off over the next three months. If that amount is $200 a month and you can comfortably cut back in areas, you spend about $550, because you have to factor interest charges, too.
“That just helps hold a person back from saying, ‘I might as well just blow it anyway.’ A lot of people already have that defeatist attitude because they haven’t thought about how can I minimize the damage and what steps to take.”
They recommend to clients that they try using cold, hard cash while shopping. Although carrying large sums can be dangerous, using cash can force a person to see how much they’re spending.
“It’s so much nicer reaching for cash rather than credit cards,” he said. “There’s an impact to opening up your wallet and taking money out of your wallet. You feel that. You don’t feel the plastic.”
Spouses can also be a challenge to budgets. Some are tighter with the purse strings, while others easily get caught up in the season.
Finding common goals to work toward — like vehicle purchases, children’s education, retirement or vacations — can help put Christmas spending in context.
“The one spouse is trying to be responsible, and they start to resemble your mom or dad and the person tunes them out,” he said, mentioning third-party interventions can be good to find a middle ground.
Hannah also recommended families be real with one another in limiting spending and being practical. He said in his family, they draw names to buy one gift for each other with a $50 limit. Instead of buying massive amounts of presents each year for children, he said, grandparents were encouraged to buy $100 education bonds each year — which were greatly appreciated by the time kids were 18 and wondering how to pay for post-secondary school.
“Being organized makes a huge difference. Having a plan versus operating by your hip pocket makes a huge difference,” he said, adding that they shouldn’t beat themselves up if they still found they overspent. “Maybe you spent $200 more than you planned, but maybe that was $500 less than last year.”
And if people find they slip, they should get help sooner rather than later.
“If a person finds themself in financial difficulty, don’t wait to get help. It’s amazing that the week leading up to Christmas how busy we are here. It’s because we have people who are in extreme financially difficulty and at that time of year, it’s just magnified,” he said. “It’s important to get help. Every day you wait just means another sleepless night, the more phone calls you don’t want to respond to.
“By seeking help, it means you’re taking action. Most of us, by taking action to address your problems, you feel a whole lot better because you’re moving forward and in charge again.”
For information, visit www.nomoredebts.org.
Tips for a Christmas budget
Practicality will shield your pocket from a powerful punch. Here’s a few tips from the Credit Counselling Society of B.C. on how to save some cash this holiday season with just a tiny bit of planning:
• Find cash fast: Cut back on those daily expenses like coffee or lunch out and set aside the funds for the Christmas budget.
• Social media savings: Check the Facebook pages of retailers to look for coupons or promotions.
• Eat first, then shop: Make sure you are full before you leave the house to avoid having to feed the family with pricey take-out.
• Shop at off-peak hours: Crowds are crazy, and those stressful situations can lead us to make bad financial decisions.
• Babysitting exchange: If you need to leave the kids at home while at the mall or dinner parties, arrange with couples with kids to trade off excursions. That will save on babysitting costs.
• Buyer beware: Interest-free deals sound great, but the bill can add up immediately once the expiry date passes. Ensure you can pay the entire bill off within the interest grace period.
• Silent night: Make sure to schedule in some quiet time with family or friends. Looking at Christmas light displays or enjoying a hot cocoa while listening to music can be just the reward to temper the frenetic season by reducing stress and the need to overcompensate with presents.
