How to avoid holiday debt

Follow these tips to manage holiday spending without the stress of added debt.

Holidays are a time of year when it’s easy to overspend. The same can be true of vacations or family celebrations. It’s good to approach these special times with a spending plan and a spending limit. Learn steps you take to manage your spending now that will help prevent credit card debtDebt Money that you have borrowed. You must repay the loan, with interest, by a set date.+ read full definition from adding up.

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How can you prepare before the holidays to avoid debt after?

To keep debt in check while you’re getting ready for holiday festivities, consider these 6 tips:

1. Make a spending plan. This can be simple. Just write down what you expect to buy and how much it might cost you. Your plan should include everything you’ll spend money on over the holidays, such as gifts, cards, decorations, parties, host gifts, charitable donations and food.

2. Set a budgetBudget A monthly or yearly estimated plan for spending and saving. You work it out based on your income and expenses.+ read full definition. Now that you know what you’re likely to spend money on, compare this with how much you can reasonably afford. Set a budget limit. This can come from your normal monthly budget, or perhaps you have a savings accountSavings account A bank account intended for depositing funds. Pays interest and lets you withdraw cash at any time.+ read full definition set aside for holidays and vacations. Now’s the time when you can put that savings to good use. Modify your spending plan if you need to, to stay on budget.

3. Save before you shop. The earlier you can start saving for the holidays, the better. Put aside a little bit each month throughout the year. That way, when the holidays come, you’ll be spending cash you already have on hand.

4. Make a list. That spending plan you made can help you create your shopping list when you buy gifts or groceries. If you shop with a list, you’ll be far less likely to buy on impulse. That means you’ll also be more likely to stick to your budget.

List the people you plan to buy gifts for. Think about their interests and the kind of gifts they would like. Estimate the cost of each item on your list. You may be able to do some comparison shopping online. Check that the cost of each gift fits your budget.

5. Watch for sales and other discounts throughout the year. Spreading out your shopping can help you manage your holiday budget so you’re not tackling it all in the same month. Most retailers offer promotions throughout the year. If you know ahead of time what you’re shopping for, you can take advantage of sales well before the holidays arrive.

6. Look for ways to reduce your travel costs. There are two ways you can try to cut your travel costs for the holiday season:

  • Buy your tickets early, at least by October.​
  • Wait until the last minute. Some travel websites have last-minute sections that offer huge discounts on travel packages. You must be flexible on your dates, though, and there’s a chance no travel packages will be available.

How can you be a smarter shopper?

Shopping can be fun or stressful. And no matter what, it can get expensive. Follow these 6 simple tips to be a smarter shopper:

1. Use cash or debit card when you shop. Paying cash for everything can help you stick to your budget. If you use a credit card, pay it off in full and on time to avoid interest charges.

2. Keep track of what you spend. Turn your shopping list into a spending tracker as you shop. If you start shopping early, it can be easy to lose track over several weeks or months. Try putting all your receipts in a single envelope or online folder. As you shop, add the amount of each new purchase onto your total.

3. Shop early if you can. If you shop at the last minute, stores may be out of the items on your list. Rushed mall trips can also lead to more impulse buying. You’ll also have less time to shop around for the best deal. If you shop online, you’ll pay higher shipping fees if you wait to order until just before it’s almost time to wrap the gift.

4. Use your credit card wisely. Most Canadians pay off their credit cards each month. However, holiday spending can put a strain on how quickly we can repay, because it’s a time of increased spending. Credit cards typically offer an interest-free grace period before you will pay interest, as long as you pay your full balance in that time. After that time, you’ll continue to collect interest on the amount you owe. This will add to the total amount you ultimately pay for an item.

Now is a good time to check how much interest your credit card charges and when your statement balance is due. If you can pay using cash or e-transfer instead, it could reduce your reliance on credit. But, if paying with a credit card is the best option for you, make a plan to pay it off as soon as possible to reduce future debt.

Use your credit card safely with these 7 tips.

5. Be cautious of buy now, pay later plans. Some retailers offer buy now, pay later plans. These allow you to make instalment payments or defer the payment entirely. These are essentially a kind of loanLoan An agreement to borrow money for a set period of time. You agree to pay back the full amount, plus interest, by a set date.+ read full definition that breaks up your purchase into instalments that you pay off over time.

Always read the fine print. Some services will run a credit check before allowing you to use it. There may be interest fees or penalties for missing a payment. The interest rates charged for purchases are often higher than the average credit card.

6. Beware of instalment loans. There are other ways to borrow money, including using your line of creditLine of credit An account that you set up with a financial institution (often a bank) to borrow money. It lets you borrow what you need, when you need it, up to a certain limit.+ read full definition or taking a loan from your bank. Loans often have lower interest rates than credit cards.

However, alternative lenders may offer tempting instalment loans. These are short-termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition loans repaid later with regular payments. Instalment loans are often advertised as a quick way to take care of short-term expenses. In reality, these loans can charge interest rates significantly higher than credit cards. If the loan is repaid over several years, instead of right away, the interest could even add up to more than what you borrowed in the first place.

Try out our calculator to see how long it will take to repay credit cards and debt.

What could you do after the holidays to be ready for next year?

If you feel stressed about money around the holidays, use it as an opportunity to plan. Identify where you spent more than you planned. Use that information to inform your spending plan for next time.

Consider setting up a weekly or monthly transfer to a savings accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition so you’ll be covered next year.

Use the spending habits calculator to see how changes to your spending can impact your budget and help you save more of your money.


Remember these simple steps to stay on top of your holiday spending:

  • Take charge of your holiday spending by setting a budget and planning ahead.
  • Save throughout the year so you’re not surprised by big expenses when the holidays come.
  • Shop with a list and use cash when you can.
  • Manage credit cards wisely by paying your balance as soon as possible to avoid interest.
  • Beware of buy now, pay later plans, or instalment loans. They may charge high interest.
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