Ryerson University Expert Offers Financial Tips on Holiday Spending and Budgeting
1. Make a budget. Look at your overall finances and determine what is a reasonable and realistic amount of money that you can afford to spend over the holiday period. More specifically, think about how solid your income earning status is in the New Year. Don’t panic. Just be realistic. Once that’s done, assign amounts to each individual you are buying a gift for. Figure out the total, and if it’s above your budget, knock down the amount for each person by the required percentage, and hopefully, you’re there. Don’t forget to include cards, wrap, tape, postage, charitable donations and any other miscellaneous holiday expenses in your budget.
2. To help you stick to your budget, keep all your receipts and track your spending.
3. To avoid a January credit hangover, only spend money you have, and don’t purchase gifts on your credit cards unless you know you can pay them off within your statement period.
4. When credit cards are the only accepted methods of payment, as in online transactions, save the money you will need before you make the purchase. Then pay off your credit card immediately after charging it.
5. A line of credit typically has a much lower interest rate than credit cards. A line of credit can be a cost-effective, convenient way to borrow money for a short period of time. Ask your financial institute about opening a short-term line of credit for the holiday season in lieu of doing your shopping with a credit card. There is generally no annual fee for a line of credit and depending on the terms and conditions of your line of credit agreement, you usually do not have to pay a penalty if you want to pay off the entire balance.
6. Beware of “Don’t Pay Till…” deals. Check the wording of the contract very carefully. It’s only interest free if it actually says “interest free.” If it says you have a grace period that means that if you pay the balance in full by a certain date, you won’t have to pay any interest. However, if you don’t pay it off by the specified date, interest will be applied for the full term, meaning from the time that you made the purchase. If the contract says you have an interest free period, interest does not start accruing until the period has expired. If you don’t have the money now, and don’t think you’ll be able to save the full amount by the end of the term, it’s a good idea to walk away from this type of deal. A better way to finance your purchase would be through a line of credit.
7. Try setting up a separate savings account and add to it throughout the year in anticipation of the holiday season. Then you’ll have the cash and won’t feel the pressure to scrimp and save all at once. Also, you’ll have an automatic tracker of how much money you’ve spent and how much you have left at all times.
8. Look into various means of saving money:• If you see a great deal, buy five.• Go in on a group gift.• Give homemade gifts.• Talk to your loved ones and establish a gift giving limit that works for everyone.• Try Secret Santa for large groups vs. buying gifts for everyone.• Start early. Avoid buying over-priced gifts because you’re short of time. • Take advantage of post-Christmas sales for next year.• Try to find one destination for all your gift-giving needs so you don’t waste a lot of gas money driving all over town.• Cut back on your discretionary spending for a few months: take a brown bag lunch, reduce entertainment and use public transit.• Send e-cards instead of traditional holiday cards.• Shop online to browse, get gift ideas, compare prices and take advantage of online savings.
Expert available for interviews:
Alan KaplanAssociate ProfessorTed Rogers School of Business Management
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