You want to live a debt-free life, but with the holidays approaching, you’re worried you might slide back into old habits that depending on your credit cards to make ends meet. During the holidays, the temptation to overspend can take over if you haven’t prepared a budget in advance.
There are too many impulses buys and discounts on offer to keep your head down and avoid overspending, unless you know exactly how much you’re going to spend and what you’re going to buy. Then there are always expenses you forgot to account for, like buying gift wrap or gas to drive to the mall.
Start your holiday season with an airtight budget. Do your best to anticipate every little expense and leave yourself some breathing room for those you just can’t predict.
A holiday budget calculator can help you figure out how far in advance you should start saving for the holidays depending on how much you earn and how much you want to spend. They can also show you the difference between expectations and reality.
Some financial planners recommend spending no more than 1.5% of your annual income on holiday spending. That includes entertainment, gifts, food, and travel. At the average Canadian income of $51,000, you should be spending no more than $765 on the holidays. The average amount of money Canadians spend on Christmas is more than double that.
Even just being conscious of your spending habits over the holidays can help you cut back. You’re less likely to fall for Cyber Monday deals you don’t really need and more likely to stick to your gift list for the family. But a budget will go a long way toward taking that thrifty feeling and putting it into action.
Here are a few things you should make sure to get included in your budget:
- Gifts for family, friends, and coworkers
- Charitable donations
- Entertainment costs (movies, shows, etc.)
- Restaurant costs (not just nice nights out, but also those quick lunches at the mall or stops for a coffee)
- Food & liquor if you’re entertaining
- The extra gas you use driving to the mall or the airport, plus parking
- Travel, such as train or plane tickets
Making a holiday budget and sticking to it is essential if you want to quickly reduce your debt despite the holiday season. Reducing your debt is a challenge this time of year but having a plan can make a big difference.
At David Sklar & Associates, we encourage people struggling to manage debt to visit a bankruptcy trustee, now called a Licensed Insolvency Trustee. A bankruptcy trustee can help when you’re struggling to manage your debt.
Even if you have your debt under control now, will you be able to if interest rates rise? Anyone who is worried about how much debt they have should book a consultation with David Sklar & Associates before the holidays. Find a way to fix your debt problem for good, whether that’s through a debt management plan or insolvency proceedings. Make this holiday the last one you spend worrying about debt.