It seems everybody loves the holiday season – spending time with friends and family, the gifts, the meals and the parties. However, there can be a dark side to the festive season: post-holiday debt. The best way to handle that – avoid debt in the first place.
“It’s hard, but when purchasing gifts it really helps to keep the emotion in check; make a list of gifts that is pared down and covers just those things you have to get and can afford,” says Denise Wright-Ianni, CPA, CGA, a sole proprietor with offices in Toronto and London. She recommends coming up with a plan and sticking to it.
“I tell people to shop early and to spread out the pain over a few months. Go online, do some research and check prices, even if you prefer not to buy online. Most people don’t seem to know it but many stores will price match if you bring in a price quote from another retailer,” says Denise.
“People can go crazy during the holiday season, throwing caution to the wind, and spending like it’s going out of style,” says Kody Wilson, CPA, CA, who works in Tax Advisory and Business Valuation Services at Ginsberg Gluzman Fage & Levitz, LLP in Ottawa. “When we shop for ourselves we look for bargains and compare prices. For holidays, people just go in and pay for an item to get it over with and off the list. That’s a bad strategy.”
“Some people use their credit card haphazardly, and come January, they say: “What did I do?” It pays to keep a list and track what you’re spending, so you have a rough idea of where the money is going.”
Kody also notes that presents are just the tip of the iceberg. Don’t forget about festive dinners and entertainment costs. Lots of people go out to restaurants during the holidays. It’s easier to host a dinner or go to someone’s house and it’s certainly more affordable.
“Some people can’t manage credit cards, but they use them anyway,” says Denise. “If you tend to over-spend, price shop then go to the store with cash, not your credit card. If you feel you have to use the credit card – perhaps to get points – consider going to the bank right after you use the card, to pay off the amount spent. The bank is happy to let you do it and you can get that debt off the books right away.”
“People need to assess what they really can and cannot afford. During the holidays we want to give great gifts but you need to keep perspective on your personal budget and income level,” says Kody. “It makes no sense to put yourself in debt for months after the holidays.”
Denise adds: “The most precious gift is the gift of time so, instead of buying every last trendy gift, consider spending more time with the people you love or doing something for them like running errands. You don’t have to spend a lot to give something valuable.”
Brought to you by the Chartered Professional Accountants of Ontario.