Friday, November 24, 2023

Merry Spending, Happy New Debt

How to avoid a financial hangover after the holidays are over and the new year begins

In 2022, an estimated 41 percent of people used credit cards for over 90 percent of their purchases and carried those debts well into the new year. Statistics Canada said that for every $1.00 made, $1.67 is spent, and 60 percent of those consumers only plan on making the minimum payment.

6 Tips to Avoid a Financial Holiday Hangover

1. Have a spending plan tailored just for the holidays.

2. Try to save up how much you’ll spend, and avoid common credit card triggers like

• “I’ll just make the minimum payment when the bill comes in. It’s just like financing.”

• “I’ll be getting points for this purchase.”

• “I’ll somehow figure it out when the bill comes in.” Out of sight, out of mind, out of money!

3. While it’s okay to use credit cards to earn points, get cashbacks, or take advantage of other programs such as extended warranty, loss, and damage coverages, it’s not okay to run a balance as they often have very high interest rates.

4. Make a list of gifts you need to buy along with some backup ideas, what or who it’s for, and how much you’d like to spend on each item. Impulse buying means you likely won’t score the best price and will buy extra things you probably don’t need.

5. Shop around. Once you have a good idea of what you need to buy, search online for the best deals. Online searches can scour multiple online retailers in seconds using a single product description or code.

6. Account for hidden expenses during holidays such as buying those extra snacks or drinks and the additional driving around to run errands and visiting friends and family. With fuel prices so high, this cost can be significant.

How can you ensure you’re ahead of the financial curve instead of behind it this New Year?

6 Essential Money Tips

Disposable income is what you have left over after paying fixed expenses like your mortgage or rent and groceries.
Keep separate accounts for spending, saving, and emergency funds.
Stick to a spending plan that works for you and your family, and ensure it’s realistic. Spend less than you earn, and don’t use credit to supplement your lifestyle.
Engage your family in discussions around finances. This avoids confusing needs with wants.
Think of money in net and not gross values. A $1,500 bonus might only buy you about $1,000 of stuff after 25 percent in income taxes, plus provincial and federal sales taxes.
Remember to live within your means, and learn to work with your personal finances, not against them.

We often get caught up in all that marketing companies do and think we need to spend lavishly during this time of the year. Don’t forget that it truly is the thought that counts. And most importantly—have fun with those around you!

Merry Spending, Happy New Debt

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