How to budget for and during the Christmas holiday season

7 tips for prudent gift givers

If Christmas is the most wonderful time of the year like the song says, why does it also tend to be stressful?

Part of the reason is the inevitable financial strain. 

“Christmas is not an emergency or something that happens out of the blue,” says Tannya McBride, JR Shaw School of Business finance instructor and a certified financial planner. “But people still fail to budget for it.”

So how do you tip the scales in wonder's favour? Mostly, it’s a matter of exercising financial discipline, before, during and after Christmas, says the Finance grad (class of ’07). Here's how.

Make a list

santa looking at his list

When you go to the mall, says McBride, all you see is “sale, sale, sale, and then you end up buying things you don’t need.” A list keeps you focused.

(Pro tip for next season: act on ideas you gather throughout the year to lessen the impact on our accounts come January.)

Set a budget

woman using calculator

“Mistake Number 1 is not having a budget,” says McBride.

Mistake Number 2 is not sticking to one you do have. If you’ve only allotted $50 for your sister but that perfect sweater is $75, “Let it go, and find something in your price range.”

What’s another $25, you ask? If so, you’re forgetting the obvious: “Christmas holidays are expensive,” says McBride.

Gifts are only part of the package. Costs also come with cards, postage (save this with an e-card, suggests McBride), food and drink, decorations, travel expenses and other oft-overlooked festive frivolities.

Shop online carefully

man shopping online

If you buy online, “be careful,” says McBride.

“Especially around Christmas – and Black Friday and Cyber Monday – a lot of fake websites pop up.”

Know your retailer, check the URL for anomalies. Protect yourself with a free PayPal account, she adds, which prevents sharing credit card info directly with sellers.

Cash and carry

canadian 20 dollar bills

Whenever possible, “Avoid credit cards,” says McBride – especially those issued by department stores, which she’s seen charge as much as 29%.

Even with conventional cards, spending to excess is easy since expenses don’t immediately affect your bank balance, leading to a nasty holiday hangover. Stick to cash.

Stay on track

budgetting app on smart phone

Monitor your money. How much have you spent? How quickly?

“It’s an eye-opening experience. Nobody really takes the time to sit down and add it up,” says McBride.

To make that easier, she uses, a money-tracking app that connects directly to your accounts. Let technology help keep your finances front of mind but prevent them from weigh too heavily upon it.

Start planning for next year

christmas piggy bank

It’s too late now to start socking away anything but stocking stuffers, but consider your Christmas expense report the starting point of your plan for next year. Make what you spent this season your goal.

“Start in January and allocate a little bit of money every month,” says McBride.

Start a separate savings account that will be easy to access. Not too easy, mind you – you don’t want to be tempted to dip into it. Don’t connect it to your debit card.

Pay it back

canadian loonies

Say you use a department store card with a 29% rate of compounding interest and spend $1,000. If, by the following Christmas, you don’t manage to pay down the debt, says McBride, "you’re paying $1,300 or more."

Pay less by transferring the debt to a lower-interest line of credit. Set up a monthly payment plan. Or, put your income tax return to good use.

“Most people think of it as a bonus, but [paying down] debt should be a priority,” says McBride – especially if, come December, you want to focus on enjoying the real reason for the season.

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