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Tips to make your holidays merry — and debt free
'Tis the season for gifting and for many Canadians, that can mean getting carried away with the 'spirit of giving' and spending more than their budgets can bear.
To avoid an avalanche of hard-to-pay bills in the months following Christmas, here are a few shopping and budgeting tips to help you enjoy the season and the debt-free months that follow.
Ways to stretch your budget
These tips can help you reduce Christmas costs:
• Spend smart. Make a list that matches your budget and stick to it. For next year, start early and shop through the year when it's easier to make the most budget-conscious decisions.
• Be creative. Give crafty 'from the heart' gifts like scrapbooks, recipe books or photo albums. Use newspapers or cheaper brown paper instead of expensive wrapping paper and string or yarn instead of ribbon. Reuse wrapping paper and gift bags from gifts given to you.
• Seek out discounts. Take advantage of limited time offers. Check websites like WagJag and Groupon for money-off gift options. Look for discount coupons online or in your newspaper. And don't forget to check out discounted merchandise at your retailers of choice.
• Combine to save. Instead of buying individual presents for everyone in your family, get one present they can use together. Or join with another family member to purchase 'combined' gifts instead of going the 'individual' (and more expensive) route.
Use credit wisely
What is the real cost of a $200 gift when you pay for it with a credit card instead of cash? If the annual interest rate on your credit card is 22 per cent and you make the minimum payment of $10 each month, it will take you 26 months to pay off the debt and your total cost will be $251.43.
That's why you should:
• Limit credit purchases. Avoid impulse buys and keep your cards in your pocket or purse unless you intend to pay off the balance each month. Don't take cash advances on your credit card because you'll be charged interest from the day you take the advance until the day you pay off the entire amount. If you are using your cards and do intend to pay them off fast, try to use cards that offer reward points that can reduce the cost of gift purchases.
• Make payments as soon as you can. Interest is charged daily so reduce your costs by paying promptly and always try to pay more than the minimum amount owing. If your balance is growing, stop using your credit card until you get that balance under control.
A realistic Christmas shopping plan combined with the right long-term financial plan will ensure you have a merry, debt-free Christmas every year.
Here's a gift you can give to yourself — financial security. Talk to your professional adviser about the best ways of unwrapping that precious gift.
J. Kevin Dobbelsteyn is a certified financial planner with Investors Group Financial Services Inc. His column appears every Wednesday.