Tis the season for giving, and many holiday expenses find themselves landing on credit. If you were to borrow $1,500 to pay for all expenses this holiday season on a credit card that charges 28% interest and decided to pay just the minimum payment, it could take upwards of 19 years to pay off and cost an extra $3,978 in interest payments.
Matthew Keenan of Credit Counselling Service of Sault Ste. Marie and District offers the following advice for sticking to your holiday budget and helping to avoid the credit crunch come the New Year.
Set a budget:
Having a holiday budget starts with what you can comfortably pay in cash come the end of the month. It also means that if you decide to use credit as a convenient tool to buy gifts, you will be able to cover the bill in January, in full, in cash. This amount will help set you up for your holiday spending and should be seen as a hard line not to go over.
Make a list and check it twice:
There is a reason the man in red has a list and checks it twice. By making a list of who you are going to be buying gifts for, you are able to see where your money will be going. A list also helps you stay inline when it comes time to shop.
Your list should include who you are buying for, what you are buying, and how much (including tax and shipping cost) you will spend.
You should also have a list of all the holiday trimmings you need to buy and factor them into your holiday budget. Do you need a new string of lights? What about new wrapping paper, hostess gifts, etc.?
Compare all of these costs to your budget. Are you over budget? Then you have to decide where to cut back.
Use reward points:
In many cases, premium credit cards allow you to collect points based on the money you spend but also carry an annual membership fee. You can use these points to buy gift cards to stores that you plan on shopping at for the holidays. Cashing in these points can help you stretch your holiday budget
Leave the cards at home:
By using cash only, you must stick closely to your list and what you have budgeted because; going over for one person will mean that you are taking from another. When you use credit or even debit, the likelihood that you will just swipe your card to make up the difference increases.
When shopping with cash it may be wise to have a number of envelopes with you, each labelled with the recipient’s name, gifts you plan on buying, and the allotted amount of cash. This way you know you will have enough to cover your gift expenses.
It is easy to let our spending get out of hand; the RBC survey confirms that many do. By taking a few seconds to keep track of your spending against your list and budget, you will be better equipped to keep on track and make changes where necessary.
Start saving for next year:
According to the RBC post-holiday survey, only 31% of Canadians felt that they should set a little aside each month to prepare for the holiday season. Saving $50.00 each month, starting in January, means you will have $600.00 by Christmas time 2017. Starting to save in October though, you will need to save $200.00 to have the same amount for the holidays. It is a lot easier on a budget to save $50.00 then it is to save $200.00.
You can make this savings automatic by setting up a savings account and automatic transfer of money on payday.