Most of us will be spending our hard earned dollars on everything from food, gifts, and décor, to clothing and perhaps travel this holiday season. If you want to avoid starting the New Year with a holiday shopping hangover, then read on! The financial experts in downtown Burlington share their tips and common sense advice to keep that hangover at bay.
Lise Andreana, Founder, Continuum II, an integrated financial planning service provider, has found in her research that on average, Canadians will spend $1,800 each during the holidays and 78 percent of Canadians plan to cover that cost using credit cards. She adds that on average it takes a family six months to clear that debt. “Needless to say, going into debt to celebrate the holidays is a poor financial decision.”
Peter Skoretz, Financial Advisor with Edward Jones Investments on Pine Street, says we should be wary of certain pitfalls and “tricks” of the retail trade at this time of year!
- Buying everything on credit. Skoretz warns that high interest rate on credit cards adds to your overall debt and makes it harder to make monthly payments. If you can’t pay the full amount by the due date, you are putting your credit rating at risk among other negative consequences.
- Buying gifts for people you are not close to. Peter tells a story about the gift baskets his wife bought one year for her entire office. While they all enjoyed their unexpected gourmet goods she did not enjoy the dent in her bank account.
- Waiting until the very last minute to shop. Avoid this at ALL costs. Not only does it save you from frenzied parking lots and long line-ups, shopping ahead will allow you to search for best prices.
- Buying on impulse. There is a lot of pressure to buy and retailers know how to tempt us. Focus on what you are really looking for, compare prices in-store and on-line so you can make the right purchase for the right person.
- Shopping when tired, hungry or with the kids. Nothing will make you break your own shopping rules faster than being cranky from a lack of sleep, food or patience. Be sure to pack your water and snacks and leave the kids with the babysitter!
Lise Andreana’s advice to steer clear of holiday debt, “The best course of action is to build a family budget based on your own unique needs. Typically this might be represented as 1% to 3% of a family’s annual income (this is your annual budget which includes weddings, birthdays, AND Christmas). “
Ms. Andreana’s tips for a debt free holiday!
- Make a list of all the people you wish to give to. Prioritize the list into groups (family, extended family/friends, service providers) take your annual budget and allocate a dollar amount to each group.
- Once you know what you can afford to spend, set up a sinking fund, a special bank account to which you contribute the preset % of your income so that when the holiday season arrives you are ready.
- Gift giving is not a competition. If your budget is tight, be creative and gift a hand written note or a unique tree ornament.
- Set a spending limit with family members, respecting those who set the lowest dollar amount. Another option is to draw names.
- Put the credit cards away unless you are confident you can pay off the balance in full come January.