(Ottawa) A holiday spending plan is always a good idea, but with inflation driving up prices and rising interest rates affecting households, creating a budget is more important than ever.
In an ideal world, you would have started planning your vacation budget several months ago, says Ann Arbor of the Credit Counseling Association. But it’s never too late.
MI 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, laughter, and good meals? Or do you want to feel stressed, exhausted, and, frankly, financially anxious?”, stresses M.I Arbor, director of strategic partnerships and education at the association.
It’s not a good way to start the new year with a large credit card bill that you can’t pay in full.
Ann Arbor, Credit Counseling Association
According to MI Arbor, it’s important to be very specific when making a list of people you want to give a gift to and determining how much you want to spend.
Additions to consider
But your holiday budget should include more than the cost of the gifts you hope to give, and MI Arbor says it’s important to consider all of the season’s extras.
The costs of cards, ribbons, gift wrapping and shipping all add up.
Your 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 the hosts.
Travel costs can be significant during this time, even if you are not traveling cross-country.
Additional car or taxi trips to visit friends, family and other gatherings can add up and should be taken into account.
Financial 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 the thought of holiday spending is causing them financial anxiety.
For example, 37% said they were not sure they would be able to purchase all the items on their holiday shopping list.
Understand your expenses
Understanding how your money is spent today is key when setting a budget, says Gayle Ramsay, head of everyday banking, segments and client growth at BMO.
But preparing a budget is only the first step; And you should also respect it.
According to MI Ramsay, people often set up budgets without taking the time to examine how their money is currently being spent.
“This is where they usually fall into traps,” she said.
To do this, MI Ramsay says there are digital tools built into many of the bank’s 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 exceeding the budget this year will also be greater.
Interest rates on loans, such as lines of credit that borrowers can use to pay unexpected bills, rose as the Bank of Canada raised its benchmark interest rate in its battle against inflation. Although not as high as credit card interest rates, interest rates on lines of credit are now much higher than they were two years ago.
Although the desire to be generous is strong during the holidays, MI Arbor says no one wants a gift that will 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 concluded.
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