This story was originally titled "Festive-Friendly Budgeting," in the December 2007 issue. Subscribe to Canadian Living today and never miss an issue!
Is it possible to celebrate the holidays and escape a financial hangover in January? Absolutely. You just have to know how. We look at situations that can typically lead you astray and show you how to avoid blowing your holiday budget, so you can enjoy a stress-free season.
The budget
No one actually wants to make a Christmas budget, but having no budget gives the illusion of no limits – leading straight to debt. A budget will help you avoid the slippery slope. First, determine how much you can afford to spend. Margaret Yang, a financial adviser with Edward Jones in Toronto, recommends keeping your Christmas budget to within two to five per cent of your annual income. The more detail, the better.
"People often have a rough idea of the total amount they want to spend, but they don't know the specifics," says Yang. So make a list of all your expenses – gifts, decorations, food and travel – and allocate the appropriate amount for each item. Use the same approach when buying gifts for friends and loved ones. Rather than feeling restricted (OK, maybe you will a little), you can spend within your Christmas budget guilt-free.
When shopping, you'll likely be tempted to buy more extravagant gifts – that flashy video game system instead of a soccer ball for little Johnny. "Before you purchase the more expensive item, ask yourself, Where am I going to get the money for this?," says Brenda Purschke, a counsellor at Credit Counselling Services of Alberta in Calgary. Keep your receipts and track your spending to help you stay the course.
Even if you're celebrating Christmas on a budget, you can still enjoy the season with a little creative thinking: use coupons, purchase food items with your extended family and then divide them up (buying in volume is cheaper), go in with other family members for a group gift – maybe that video game system for Johnny – and give "gifts of love," such as homemade cookies or a digital photo album.
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