While the feeling of watching someone open “the perfect gift” is one of the best parts of the holiday season, the sinking feeling you get in the pit of your stomach when you open your credit card statement in January isn’t as rewarding.
Here are four quick tips to make sure that while you enjoy your holidays, you don’t hate what comes after!
1) Don’t put anything on a credit card you can’t afford to pay off.
Like many, I rarely carry cash. Putting purchases on plastic is just more convenient and the rewards points I snag don’t hurt either. That being said, studies show people are much more likely to spend more than they intended if they are paying with credit cards as opposed to cash. If you find yourself heading down the that road of overconsumption, it’s important to put on the brakes as soon as possible, because if you can’t afford to pay your credit card balance at the end of the month you’re going to get hit with some pretty rough interest rates.
For example, say you purchase a beautiful new designer winter jacket for $650 + $78 in sales taxes for a total purchase price of $728. What an awesome gift! Since you’re running a bit short on cash this holiday season you put it on your credit card that carries an interest rate of 19.99%. When January rolls around, you fully intend to pay it off, but there were all those great Boxing Day sales you had to get in on right? Long story short, every month something new seems to pop up and you’re only able to make the minimum payment on that original purchase. Our handy Financial Consumer Agency of Canada (FCAC) Calculator tells us that eventually you would pay $649.91 worth of interest, bringing the total price of that jacket to $1,377.91! Don’t overspend and create a long-term credit card balance for yourself.
2) Don’t be pulled off your budget for “the perfect gift”.
The easiest way to give yourself a fighting chance against the temptation to spend more than you can afford is to sketch out a quick budget – and then stick to it! It doesn’t have to be anything fancy, just a list of who you need to purchase gifts for and then a price ceiling. Once those ceilings are set, be aware of the tendency to look at that number as a “flexible range” and consequently justify overspending a little at a time.
A planning session also helps you make clearheaded decisions before you are faced with the onslaught of advertising and slick marketing techniques that retailers employ at this time of the year. Deciding that you could probably get something nice for under $20 for your office Secret Santa is much easier at home, than if you’re meandering through a pressure-packed sales environment. Finally, every time you decide to go over your budgeted allotment on a gift, realize that you have unconsciously set a precedent in your mind, and that it will now be that much easier to “cheat” on the next purchase, and the next one, etc.
3) ‘Tis the season to find part-time work!
Sometimes no matter how far you try to stretch your holiday budget, it just won’t cover quite what you want it to. Instead of looking at borrowing money on a line of credit or with your credit card, consider taking on some part-time work. The holiday season is a classic case of supply and demand when it comes to labour. As everyone heads out the door to work parties at restaurants, shopping binges, and holiday events, there is a real crunch to find people to work all of those service and stocking jobs. Their pain can be your gain. For example, Amazon just hired 100,000 people to help with their holiday rush. My friend used to snag a few hours here and there at the liquor store to help with his holiday budget.
4) Your time and expertise might make a great gift.
I have to admit, I’m a hard person to shop for. I’m fortunate to have very simple tastes and when I require a material good I usually purchase it immediately because it happens so infrequently.
Over the past couple of years when my family has asked what to get me, I’ve tried hard to think about what I really appreciate and enjoy. I often arrived at the conclusion that unique experiences such as a special meal cooked for me, help on a certain project, or even just paying for the coffee date someone made time for, are gifts I thoroughly appreciate. Everyone has something that they are good at or a bit of time they can spare. While these presents might not get wrapped and put under a tree, they are often amongst the most meaningful and heartfelt.
Remember that you don’t need to sacrifice the bank account you worked so hard for the other fifty weeks of the year to enjoy the holiday season.
Happy Holidays to you and yours!