Enjoying the holiday season and avoiding holiday debt traps is essential for a truly happy and stress-free celebration. The holidays bring joy, togetherness, and cherished traditions like heartfelt gift-giving, delicious feasts, and fun activities like ice skating. However, the festive excitement often tempts many to overspend, leading to financial stress and reliance on credit cards to fill the gaps. By planning ahead and being mindful of your spending, you can celebrate without sacrificing your financial well-being.
With so many opportunities to splurge and indulge, you can quickly rack up debt you’ll regret, leading to a financial hangover come January. That’s the reality for many Canadians, who say the holiday season is a time of financial stress.
However, enjoying the holidays is possible without amassing tons of debt. You can keep your finances intact with thoughtful planning, spending limits, and savvy shopping. Below, we’ve rounded up 9 tips for avoiding holiday debt traps.
1. Create a holiday budget (and stick to it)
Following a strict budget is one of the best ways to avoid financial trouble during the holidays. Outline how much you can spend on each item, especially gifts. Make sure to also account for food, decorations, cards, mail charges, wrapping paper, and travel costs if you’ll be heading out of town.
The more comprehensive your budget, the less likely you are to overextend yourself. That means you won’t rely on debt to fund your holiday shopping and other festive activities.
Once you’re happy with your budget, track your expenses to keep yourself accountable. Treat your budget like any other financial plan—it’s your guide to ensure you don’t get hit with a hefty credit card bill come January.
Managing paper receipts or manually entering each purchase on a spreadsheet is tedious. So, consider using a budgeting app to monitor your spending. Check out some of the top budgeting in Canada in this article from the Chartered Professional Accountants of British Columbia.
2. Set boundaries for holiday activities
Setting boundaries is crucial during the holiday season. You must choose your priorities among the endless stores and experiences vying for your attention. Doing so will make you more likely to stick to your budget instead of spending on a whim.
Will you be focusing on gift-giving this year? If so, make a list of the people you plan to buy a present to ensure each person receives an item they like without breaking the bank. Instead of dining out, suggest a potluck dinner or hosting a movie night to save money on food and drinks.
There’s no right or wrong answer when planning for the holidays. But it’s essential to be selective when it comes to commitments and stick to them. Don’t feel obligated to accept every invitation or purchase a gift card for every acquaintance. Setting boundaries will help you save money and enjoy the holidays without feeling overwhelmed.
3. Start saving early
A solid strategy for avoiding debt is saving early for your holiday spending. In fact, it’s wise to incorporate your holiday spending plans into your general household budget.
Since you’ll be dishing out more money than usual as the holidays approach, consider building up a reserve fund throughout the year. Think of it like an emergency fund, but for treats, gifts, cards, and other holiday expenses. With extra cash on hand, you eliminate the quick fix of charging purchase to your credit card.
Start setting aside money in January if you can. And it doesn’t have to be a massive amount. If you save just $100 a month, you’ll have $1,200 at the end of the year. Cut back on indulgences, such as you daily coffee, to boost your savings.
4. Shop early
Delaying your holiday shopping for too long means you’ll have less time to nab the best deals. Retailers know customers are desperate, so they will quickly hike prices, especially if there are shortages of popular items. Last-minute shopping can also lead to impulse buying, fueled by an urgency to get the perfect gift.
The hard truth is that you risk overpaying for items and services when rushing to do your holiday shopping. As a result, you may have to borrow money to cover the shortfall in your budget. By shopping early, you give yourself the time and motivation to compare prices, scour for the best deals, and avoid the holiday frenzy. In addition, you can spread out your shopping over several months, putting less strain on your bank account.
Of course, you can still take advantage of some sales during Black Friday, Cyber Monday, and Boxing Day. Earmark some of your budget for these retail events if that’s your plan.
5. Give your income a temporary boost
If slashing your budget doesn’t free up more cash toward your holiday spending, brainstorm ways to bring home more income.
For example, ask your boss if you can work overtime for a few months. Alternatively, you can look for short-term seasonal work. Many retailers will be looking for extra help to gear up for holidays, which are busier than the rest of the year. If you have plenty of unwanted items cluttering your home, now’s a good time to sell them to get some quick cash.
6. Look for deals and discounts
One way to ease the financial pressure during the holidays is to find bargains. Don’t simply pay what’s on the first price tag you see. Instead, research to make sure you’re getting a good deal, whether you’re shopping online or offline.
Many retailers offer pre-holiday and special promotions throughout winter. Here are some tips for finding deals:
Collect coupons. If you’ll be hosting a dinner for your family during the holiday season, browse grocery circulars for coupons and sales to save money on food, drinks, desserts, etc. While gathering these may seem tedious and old-fashioned, you can still find some decent coupons in flyers, magazines, and newspapers.
Explore personal finance websites and social media. Websites like RedFlagDeals and SmartCanucks are teeming with coupon codes. Grab these codes and enter them during checkout to save money on your favourite items.
Get price reductions where possible. Some stores have a price matching or price adjustment policy, which means you get refunded the difference if the price drops after you make your purchase. To qualify, you must show proof that a competitor is offering the same item for a lower price.
Take the DIY approach. A hands-on approach to holiday activities can be lighter on your wallet. For example, if you’re hosting a dinner for a family gathering, prep the food yourself instead of buying ready-made chicken, pre-cut and washed vegetables, etc.
Shop at discount stores. Doing 100% of your holiday shopping at discount stores is probably unwise. However, visiting your local dollar store is worth purchasing items such as napkins, candles, plastic cutlery and cups, and gift wrap supplies. In other words, things you need but where spending a bundle isn’t practical or necessary.
Look for airfare deals. If you’re travelling this holiday season, air fair is cheaper earlier in the year, so purchase your tickets by October. Check travel websites for discounts on travel packages and use your travel rewards points if you have any to spare.
Use coupon apps and browser extensions. Rather than foraging for deals by randomly visiting stores and checking flyers in the mail, try coupon apps and browser extensions. Some examples are Flipp, Checkout 51, and Honey. You can set these to target items you’re interested in buying and receive notifications when a solid deal appears. Cashback apps like Checkout 51 are also worth exploring.
7. Use a prepaid debit card
If you need help sticking to a budget, using a prepaid debit card is a nifty way to limit your spending. This is a card you load with your own money before using it to pay for purchases. Once your balance reaches zero, you must replenish it with fresh funds to continue using it.
Since you can only spend what you load onto a prepaid card, you exercise greater control over your spending. You’re less likely to stay within your limits as you have a clearer picture of your shopping habits. In contrast, using credit gives you access to a generous credit limit, which can tempt you into buying more than you can afford to repay.
There are several prepaid debit cards available in Canada. Some offer a cashback rewards program, so in addition to avoiding debt, you also generate extra savings while shopping during the holidays.
8. Use credit card rewards
Have you amassed a huge pile of credit card rewards points this past year? If so, now’s the perfect time to use them to cover some of your holiday shopping. Instead of racking up more debt, let your credit card ease the financial strain on your wallet.
Many credit cards offer rewards that can be redeemed for gift cards and merchandise. You can even apply them as statement credits to lower your holiday credit card bill.
Credit card rewards usually offer the most bang for your buck if you redeem for travel expenses, such as airfare and accommodation. So, if you’re planning to leave town to visit family for the holidays, research the savviest ways you can use them to lower your travel costs.
9. Create hand-made gifts
Personalized, hand-made gifts can be lighter on the wallet than store-bought ones. They’re also more meaningful and memorable and have a charm that the former can’t replicate.
So, instead of spending a small fortune on extravagant gifts from your trip to the mall, create heartfelt items using your own hands and ingenuity. Whether you’re skilled at baking tasty cookies, knitting cozy sweaters, or making fancy beeswax candles, you can create custom gifts your family and friends will appreciate.
Check out the following articles for ideas to spark your creativity:
- 120 DIY Christmas Gifts That Everyone on Your List Will Love
- 24 Inexpensive Homemade Gifts That Feel Extra Special
- 100 Best Homemade Christmas Gifts You Can DIY Last-Minute for Family and Friends
The bottom line on avoiding debt traps during the holidays
As the holiday season draws near, it’s natural to feel pressure to spend more than usual. However, there’s no need to max out your credit card to celebrate and enjoy the festivities. By setting a budget, planning ahead, and sticking to your spending limits, you can avoid the financial stress that often follows in the New Year. Starting your shopping early and hunting for deals will give you more control over where your money goes, too.
If you’re concerned about dealing with debt after the holidays, check out our DIY debt relief strategies guide. There are always options for getting your finances back on track.
