This year the average Canadian will shell out over $1,000 on holiday gifts and expenses. More shocking is that almost a quarter will spend over $2,000.
Less than half of Canadians save up for the holiday season relying on credit cards to provide for their gifting needs. Over thirty percent of those who use credit cards will spend more than they had budgeted for. When the bills come in January they realize that they are in trouble.
In October Statistics Canada released a report that suggested that Canadian household debt is rising. January is known as for being the largest period of bankruptcy and insolvency signings, a sign of how one day can impact your entire financial picture.
Senior Vice President and Trustee Doug Jones at BDO Canada says that it's not to early to start budgeting for the holidays in July.
Jones discussed some basic ways to avoid added holiday debt during a phone interview that make sense year round.
"It's about thinking ahead and being smart," Jones advised when it comes to holiday shopping adding that holiday expenses are more than just the gifts. "Many people forget that there are added expenses that come with the holidays that can also include travel, parties and new outfits."
Jones said that at BDO there are online tools that can assist Canadians with their budgeting needs so that they can avoid getting further into debt.
"At BDO we are constantly spreading the message on how to budget," Jones said. It's a skill that isn't being taught enough. Jones has seen countless young adults leaving high school without learning basic skills that can lead to a debt free lifestyle.
Some of the ways to make sure that this holiday season doesn't lead to a nightmare come January is by having a real list of all of your expected holiday expenses and sticking to it. When you go out shopping leave the credit cards at home. By using only cash or debit you can only spend what you have. Consider buying gift cards or taking family members out for a Boxing Day shopping trip to save even more.
For those who have large families having a family gift draw is a way to make sure your loved ones can really enjoy the season without worrying where the money is coming from.
There biggest DON'T when it comes to holiday shopping is going out at the last minute with a credit card. It's just too tempting to over spend on an over priced gift.
Giving to charities is another expense to add to your budget if you can afford to. Jones said that he has seen families that have to visit food banks in order to live who give tithes to their church. If you can't afford to give money to a charity or your church you can always donate your time instead, something that will not put you in debt.
For parents living on a strict budget the holiday season can be difficult. Being honest with your children and letting them know that "we can't all keep up with the neighbours" gives a greater gift than what is under the tree. The gift of learning to be debt free and understanding how to budget will help them throughout their lives.
The holidays are about family, friends and good times. By being aware of your budget those good times can roll into a happy new year.