Young Family Discussing Family Finances

10 Tips for Canadians to Avoid Overspending During the Holiday

Christmas holiday is filled with joy and peace. It should be the moment where families and friends get together. However, rather than just spending quality time together, many Canadians often overspend their savings during the holiday season. According to an article from Global News in 2015, 58% of young Canadians between age 18 to 24 spent during the holiday, while 41% of Canadians also overspent in 2015 1) Although one might think young Canadians were more likely to go over budget, it was the over 55 age group who overspent the most.

After conducting some research and combining my years of experience working with clients, below are “10 Tips to Avoid Overspending During the Holiday?”

1) Don’t Spend with Borrowed Money

This is the number one and far most important one, so I’m just getting this off my chest upfront first.

I have seen way too many people who overspent during the holiday. They borrowed from line of credit, credit cards, cash advance, bank accounts overdraft. It took them months or even years to put their finance back on track.

You should spend the money that you already have, not the one that you will, or you might, or you’ll probably have in the future.
If you do not have the money, then start saving it. Cut down your spending, and set aside the money. If you really cannot save the amount of money that you desire, then reduce the holiday expenditures.

2) Set a Budget

Some people can record very well in regards to their spending. They can easily retrieve the details on how much they spent on each item. Although, I agree this could be a good practice, I personally do not have much success in doing so. I do keep track my ongoing expenses in details. (i.e.: mortgage, utilities, insurance premiums, loan payments.), but not so much for holiday spending.

There are so many small and variable consumption during the holiday. Despite, there are apps and tools to make the recording process easier, it really take a lot of effort and discipline to record all of them.

Rather than micromanaging on each purchase, I would set a budget for this holiday. Let’s say you set a budget of $1000, you could have the flexibility on how to spend on each category. (i.e.: gifts, dining out, clothing, movies), but you should stick to this number as your TOTAL holiday spending and nothing more.

3) Set Aside Holiday Spending into a Separate Savings Account

It is very difficult to keep track of your holiday spending if they are mixed up with your other regular expenses. Therefore, I usually would open up a different bank account for each specific purpose.

I particularly like the banking accounts with user-friendly features. Rather than just viewing a bunch of boring account numbers, some  actually allow you to rename your bank accounts into something meaningful, (i.e.: Holiday Spending, Trip Savings, etc.). This way, all the bank accounts be very easily recognizable. Of course, no monthly fees, no minimum balance and free cheque book are some other core features that I would look for.

If you want to avoid overspending with a credit card, you can ask the card company to reduce your limit. Once again, we should go back to rule #1, which is “Don’t Spend with Borrowed Money”. If you will be using a credit card to make any purchases, make sure you already have that amount of savings in your bank account. To avoid being charged with hefty interest fees, always pay off your credit card balance within the grace period.

4) More Home Gatherings and Less Dining Out

Dining out could be a money drainer during the holiday season, especially if you order wines.

In the past few years, I either hosted gatherings with my friends and family at my home or I would go to others during the holiday season. To reduce the workload of the host, we usually would do a potluck.

Even when we purchase wines from the LCBO, it’s a lot more affordable than ordering at a restaurant.

5) Spend on Long-Term Value, not Short-Term Satisfaction

Every time before I buy anything, I would ask myself the question: “Will this purchase brings me any long-term value or this can only bring me a short-term satisfaction?”

For example, 7 years ago, I traveled to Japan, and I bought a nicely designed suitcase. Since I often carry lots of documents and a laptop when seeing clients, its wheels at the bottom really help offloading some of the heavyweights for me. Today, I’m still using this suitcase.

Do I also purchase items that bring me short-term satisfaction? Of course, I do! I would also go to a movie, or dine out every now and then. Just that I would not spend too much budget in doing so in those categories.

6) Shop Online

Nowadays, more and more people choose to shop online rather than going into a brick-and-mortar store. It’s super convenient and you could find the best deal with just a few clicks on your laptop. Actually, a few clicks might already sound outdated, maybe I should say a few taps on your smartphones. In fact, most of our household purchases are done online in these few years.

If you are willing to spend a bit of time in researching, you could often locate coupon/discount codes from different websites.

One thing I must caution you, do not fall into the sales tactics. Many e-commerce websites have the functionality to keep track of your spending habit and preference. Before you make a payment online, they often make suggestions to persuade in buying other merchandises as well.

Once again, you should revisit Tip #5, and evaluate whether the additional purchase could bring you long-term value or not. As always “Don’t Spend with Borrowed Money”.

7) Price Matching

Although most of my household purchases are done online, I still enjoy going to a shopping mall every once in a while. The experience is very different from online purchasing. I can feel and touch the products before I buy it. I can also interact with other people, rather than sitting lonely in front of my laptop.

The best thing is my phone plan has data everywhere in Canada. Before I decide to make any purchase at a physical store, I can always find out the best deal online. Then I could request the store to do a price matching. In most of the time, they are willing to do so.

8) Don’t Let the Kids Drive Your Spending Decision

If you have a young child in your family, you would know that the “Toys Section” of department stores are always the danger zone to your wallet.

Being a father of two daughters, I do not encourage purchasing too many expensive toys for a child. If you remember Economics 101, when a child first received a present, they would be very happy. On the second day, they still like playing them. But when it gets to a month, their interest in the toy diminishes to the point, where it would be indifferent to any furniture in the house.

Even so, they would do everything to persuade you into buying their favorite toys.

  •  “I would be good if you buy this toy”
  •  “My friend has it, why can’t I?”
  •  “I love you”
  •  “I hate you”

The list goes on and on until you surrender.
Therefore, it is important to set up some ground rules with the kids before entering the mall. You can give them a fixed budget (i.e.: $30) so that they can pick the toys they want. It would still be subjected to your final approval since some might not be age appropriate for them.
This could be a good way to teach them about budgeting. The most important is you lead them by demonstrating a good example.

9) Consider the Opportunity Cost of Overspending

Although constantly evaluating your consuming decision might not sound appealing, being a responsible adult, we should understand that there are consequences in every choice we pick. Rather than spending recklessly, what can be a better choice for you and your family?

Can you save the money and organize a memorable trip with your family? How about putting that toward your child’s education? What about your retirement savings? Can you use it to reduce outstanding debts?

Always think twice about the holiday spending. Especially when there are major purchases involved. Remember a dollar spent today is more than a dollar lost to yourself in the future.

10) Know your Weakness and Limitation

During the holiday season, there are so many different temptations leading you to overspend. You could see holiday spending commercials on a bus, subway, billboard, TV, radio, online ads, or even public washroom. They are everywhere giving you all kinds of so-called justifiable reasons to buy their products.

I know a number of friends who always have the urge that they ought to buy something whenever they go to a shopping mall. This is in regardless of whether the purchases would bring them any kind of satisfaction or not. Else, they would have a sense of incompletion and that their time was wasted.

If you are one of the people who can be easily tempted into the shopping mode, there is nothing to be ashamed of. It is actually a good sign that you have a great understanding of yourself.

Rather than shopping alone, you can bring a trustworthy friend or family member to go with you. Ask them to keep you accountable for each buying decision.

In conclusion, I’m not against holiday spending. After all, what’s the motivation for saving money if we can never spend it.
But as a grown-up, we should be responsible for each of our financial decision, especially when there could be other family members who are depended on us.

Spend wisely, and remember “Don’t Spend with Borrowed Money”.




Disclaimer: All the details in this post are for general understanding only, not intend to provide any specific advice and could be subjected to changes without notice. Please contact us or consult with a financial professional before making any decision.

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