(Ottawa) A holiday spending plan is always a good idea, but as inflation drives up prices and higher interest rates weigh on households, it’s more important than ever to establish a budget.
In a perfect world, you would have started planning your holiday budget several months ago, says Anne Arbor of the Credit Counseling Society. But it is never too late.
Mme Arbor advises starting by asking yourself how you want to feel in January and February, when the bills arrive.
“Do you want to have wonderful memories of time spent with family and friends, joy and laughter, and good meals? Or do you want to feel stressed, exhausted and, frankly, financially anxious? », underlines Mme Arbor, the association’s director of strategic partnerships and education.
It’s not a good way to start the new year with a big credit card bill that you can’t pay off in full.
Anne Arbor, Credit Counseling Society
According to Mme Arbor, it is important to be very specific when making a list of people you want to give a gift to and determining the amount you want to spend.
Extras to consider
But a holiday budget should include more than the cost of the gifts you hope to give, and Mme Arbor says it’s important to consider all the extras of the season.
Cards, ribbons, gift wrapping and shipping costs all add up.
The Christmas budget should also include the cost of any parties you plan to host, as well as additional restaurant meals and expenses associated with the holiday season, such as special clothing and gifts for hosts.
Travel costs can be significant during this time, even if you don’t fly across the country.
Extra car or taxi trips to visit friends, family and other gatherings can add up and should be taken into account.
Money worries can make an already stressful time of year worse for many people.
According to a BMO report, 78% of Canadians plan to buy fewer gifts this Christmas, while 51% say thinking about holiday spending causes them financial anxiety.
For example, 37% said they were not sure they could afford all the items on their holiday shopping list.
Understand your expenses
Gayle Ramsay, head of everyday banking, segments and customer growth at BMO, says understanding how you spend your money today is key when setting a budget.
But making a budget is only the first step; you must also respect it.
According to Mme Ramsay, people often prepare budgets without taking the time to examine how they are currently spending their money.
“And that’s usually where they fall into traps,” she said.
To do this, Mme Ramsay says there are digital tools built into many bank mobile apps that allow you to monitor your spending and budget to help you stay on track.
With interest rates at their highest levels in years, the consequences of going over budget this year are also greater.
Interest rates on loans, such as lines of credit that borrowers can use to pay unexpected bills, have risen as the Bank of Canada raised its benchmark interest rate in its fight against inflation. Although not as high as credit card rates, lines of credit rates are now much higher than they were two years ago.
Although the desire to be generous is strong during the holidays, Mme Arbor says no one wants a gift that is going to put the giver in debt.
“There are things to do that don’t involve spending money. There are many ways to spend time with family and friends,” she concludes.