᾿Tis the season for indulgence, whether it’s overeating, drinking too much at holiday parties, or spending too much on gifts and decorations. Some actions you’ll regret the next morning, but with overspending you may not feel the hangover effect until the bills come due in January.
Here are a few tips for managing holiday expenses to avoid a holiday spending hangover:
Budgeting: Before spending a dime on holiday expenses, calculate how much you can afford relative to your overall budget. Many financial planners recommend spending no more than 1.5 per cent of your annual income on holiday expenses.
• Can you pay off all holiday-related bills within a couple of months?
• Do you already struggle to pay your monthly bills?
• Would you need to dip into your emergency funds or suspend retirement savings in order to buy gifts for others?
Scale back: Examine how much you’ve spent in past years and look for areas to trim. Be sure to factor in: gifts for family, friends and co-workers; decorations; new clothes/accessories; gift wrap and cards; special meals; year-end gratuities and travel-related expenses.
A few tips:
• Review old credit card and bank statements to jog your memory.
• Arrange gift lotteries with family, friends and co-workers so you each buy fewer, nicer gifts.
• Suggest pooling resources to make a sizeable group charitable contribution rather than individual gifts to each other.
Get organized: Once you’ve determined your overall holiday budget, make a list or spread sheet with columns for:
• Everyone you need to shop for – relatives, friends, co-workers, service providers, etc.
• Spending limits and gift alternatives for each person.
• How much you actually spend on each gift. Overspending on one present means trimming somewhere else.
• What you gave each person to avoid giving them the same thing next year.
• What each person gave you. That way, you won’t accidentally “re-gift” something to the same person.
• Other expenses (decorations, wrapping paper, cards, etc.).
A few additional tips:
• Note return policies for stores and online shopping sites. Watch for deadlines, exclusions for sale or clearance items and restocking charges.
• Retain receipts. Many retailers will refund the price difference if an item goes on sale within a few weeks after purchase.
• Check whether your credit card agreement provides free product warranty extensions and/or price protection (i.e. will reimburse the difference if you find an identical item for less).
• While handmade gifts are unique and can be greatly appreciated, don’t overlook the cost of supplies and the value of your time. You may be spending more money and effort than necessary.
For more tips on holiday spending and budgeting, visit Practical Money Skills Canada, (www.practicalmoneyskills.ca), a free personal financial management program run by Visa Canada that offers savings and budgeting tools, including a holiday spending calculator, to help you better manage your finances during the holiday season.
Melissa Cassar is Head of Corporate and Public Affairs for Visa Canada.
by MELISSA CASSAR