Avoid post-holiday debt stress — create a budgetPosted on: December 5, 2018
As we get closer to the holiday season, there is one thing we can all agree upon: the holidays stress us out. Whether we’re juggling an increased social calendar, rushing to finish work before the end of the year, or trying to grab that last-minute gift, we’re all feeling somewhat overwhelmed. Along with all this rushing around is a tendency to over spend. We know we probably shouldn’t, but we tend to shrug it off and think about the consequences later. But then the first credit card bill arrives in January and we’re hit with one of the most difficult kind of stresses to deal with: debt stress.
Debt stress has an overarching effect on our lives. It affects our credit score, our financial independence, career choices, well-being and standard of living. In October, Equifax Canada announced that consumer debt continues to rise; in fact it’s up 5.4% since last year. But, we have it in our power to avoid the pitfalls and handle debt properly to achieve positive and desirable results. To ensure we don’t let debt control us it’s important to remember the difference between good debt and not-so-good debt. For example, good debt should leave us better off in the long-term and provide us with lasting benefits. By contrast, not-so-good debt will not provide some increase in value to us over time and tends to reduce our wealth.
Also, another way to control our debt at this time of the year is to understand how much we currently owe. Then we should set a holiday spending budget to ensure we don’t continue to overextend ourselves financially.
Calculate how much cash and debt you currently have: On a spreadsheet or paper and pencil, list your assets (what you own) and your liabilities (what you owe). Now calculate your net worth by adding up your assets and then subtracting your liabilities. If your net worth is positive, you’re doing a great job of managing your money. If your net worth is negative — or “in the red” — it’s time to be honest with yourself and not take on any more debt this holiday season.
Make a list, pay in cash and stick to your plan: Consider this list a mini-budget. Itemize what you realistically think you’ll need over the holidays, like modest gifts, food, refreshments and decorations. Based on the calculation you did above to identify how much you can afford and put an affordable spending limit next to each category. Your goal is to stick to this plan. There are often great sales in November and December, so do your research to find the best bargains.
Enjoy the season: It is possible to have a great festive season without spending a lot of money. Besides, it’s the thought that counts, not the expensive price tag. It’s also possible to use credit with good judgment and with a solid plan to pay it off. Happy holidays!
Richard Killen, Licensed Insolvency Trustee and author of the new eBook The Glass is Half Full which is now available to be downloaded for free on this page.