How to Get Through Holiday Spending When You’re Tackling Debt Repayment

With the Christmas season comes shopping lists, holiday spending, dinner party meals, and other costly festivities. For Canadians grappling with credit card debt and debt repayment, it’s a tricky time of the year to keep finances in check.

Canadians are feeling the financial crunch this year when it comes to holiday spending, according to a 2019 survey conducted by Equifax Canada. Fifty-five per cent say they’re cutting back on holiday gifts and spending as total debt per consumer levels rose by 1.9 per cent.

If you think you’re the only one cutting back on holiday spending this year, you’re far from alone: Canadians 55 and under were “significantly more likely” to limit their spending because they’re carrying too much debt and it’s causing them anxiety, according to the poll.  The last thing anyone wants is a New Year’s debt hangover.

So how do you navigate an expensive month with Christmas gifts to put under the tree, family dinner parties to host, and all the other odds and ends that come with the holiday season? Whether you’ve got one week, one month, or one year to plan, here’s a step-by-step guide to getting through the holiday season while staying on course with your debt repayment.

Don’t Abandon Your Debt Repayment Plan

First and foremost: don’t skip making a payment to your credit cards, debt consolidation plan, or any other debt repayment plan you’ve committed to.

We all know the key to financial success and debt repayment is creating a realistic budget you can stick to and dutifully following through on. While it’s so tempting to make an excuse and ditch your debt repayments during such an expensive month, the habit of budgeting applies during the holiday season too.

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Consider how much income you have for the month, and account for all of your regular expenses, including your rent, bills, and groceries. Don’t forget about your debt repayment plan, whether it’s a debt consolidation loan you’re making monthly payments on or making payments to credit card companies for balances you’re chipping away at – they all need to be addressed in your budget.

While December is an expensive month, you need to make sure you don’t abandon ship on your debt repayment goals, especially if you want to stay on track to being debt-free.

The remaining funds you have leftover can be used for your Christmas spending. Keep in mind while you’re budgeting, some categories, such as prepping lunch for the work week, won’t need as much money which you can allocate to your Christmas spending pot for holiday hosting.

Plan Your Christmas Shopping List

This month you need to make like Santa, with a list you’re checking twice.

Think of everyone in your family you still need to shop for, the groceries you may need to buy for Christmas potlucks, and then look at how much you can afford to spend on each category.

Don’t be vague as you plan out your Christmas shopping. For example, you may need to buy six presents, but don’t simply say you’ll spend $20 on each person – realistically, you’ll likely spend more on your significant other than on your siblings or a family friend. Allocate a certain amount of money for each gift.

Building this plan is the easy part – it’s adhering to the parameters that you’ve set that’s hard, especially if you’re shopping down to the wire. This is why building a blueprint for your shopping matters. If you know you’re only allowed to spend $20 on your siblings and $50 on your spouse, you won’t blow your budget when you’re doing your Christmas shopping at the mall.

The same goes for your family dinners and hosting – with a set budget to spend at each store, and with a precise grocery list of what you need to buy, you’ll make your trips more time- and cost-efficient.

Use Your Gift Cards and Rewards Points Strategically

After doing the number crunching with the December budget, and seeing what’s left for Christmas spending, most people may wonder how they’ll pull off a Christmas miracle with gifts under the tree and feeding the family a festive feast.

Now’s the time to get creative and strategic with the resources you have – specifically gift cards and credit card reward points.

It’s highly likely you have unused gift cards to department stores around your home and unused Amazon vouchers in your inbox. These gift cards and vouchers will be a tremendous help to your budget, offsetting your expenses and freeing up more of your Christmas cash. If you have a $50 gift card, that could easily buy a few gifts for your family or friends.

Most of us also stockpile credit card points and store loyalty points throughout the year, waiting for the right time to redeem them.

Credit card points could be converted into discounts on airfare, gas, or groceries, and even traded in for electronics, jewellery or gift cards – all worthy gifts for your loved ones at Christmas time. Your store loyalty points can be traded in for steep discounts or into monetary value at the cash register, too. Some types of points can even be gifted to others, essentially giving them funds towards airfare or merchandise they’ve got their eyes on.

Using these points at Christmastime is a great tactic to keep your spending within your budget.

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Go On a Cash-Only Diet

The most practical way to keep your debt from growing during the holiday season is to keep your credit cards tucked away so you aren’t even tempted to swipe or tap with money you don’t have.

Cash-only diets are a great strategy to ensure you stick within the parameters of your budget for each financial category.

If you’re only allowed to spend $300 on Christmas gifts, stick that amount in an envelope, indicate how much is allocated for each gift, and accept that once the money runs out for each person you’re shopping for, there’s no turning back.

While shopping with a credit card allows you to collect points, cashback, or other rewards, a cash-only approach is an especially important step if you don’t trust yourself to shop with plastic and pay off the balance in full afterwards.

Get Your Family Involved

According to the Equifax poll, Canadians between 35 and 44 years old had the most concern about their debt levels at about 58 per cent and prioritized being financially fit for the holidays, namely by budgeting.

With everyone’s purse strings tightening, have an honest conversation with your loved ones and your family to set limits on spending. Through discussions, your family may choose to have a potluck dinner or divvy up the expenses for a Christmas spread so that one family member isn’t responsible for the bill for the whole occasion. Beyond reigning in the gift-giving bonanza, having an open conversation about everyone’s budgets and expectations is a great way to ensure you aren’t spending beyond your means.

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Avoid Signing Up to More Debt

With the Christmas season comes an onslaught of “buy now, pay later” promotions, pay in installment plans, store credit cards with initial signup bonuses, and other gimmicks that promise you a deal to lure you in and spend more.

If you’re already grappling with debt, your best bet is to steer clear of these offers, as enticing as they seem. If you’re considering a “buy now, pay later” deal, think about whether you’ll have the money later or if you’ll only further exacerbate your situation. Store cards come with steep interest rates and you’ll want to avoid the extra credit at your fingertips too.

Save Year-Round

Ideally, at the start of the year, you’ll create an annual budget carving out savings for a handful of categories: travel, new clothes, or upcoming weddings and birthdays. Christmas gifts and holiday spending deserve a slot on your annual budget, too.

Saving for events like Christmas for the year ahead is often overlooked and this is why consumers end up in hot water after their December splurging.

With your newfound foresight, in 2020, work a small sum into your monthly budget to save towards Christmas. Putting away $20 to $50 a month could leave you with $240 to $600 by the end of the year to pay for holiday expenses.

The Best Debt Repayment Motivation is Remembering How You Felt Last January

Before whipping out your credit card carelessly, think back to how long it took to repay your debt after Christmas last year, or how much further it set you back. The third Monday of the new year has been dubbed Blue Monday – it’s when the excitement of the holiday season wears off, your credit card bills pour in, and you need to face the damage from your spending. You can steer clear of Blue Monday altogether by being practical this Christmas. Pull off a wonderful holiday season with family and friends – without breaking the bank.

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