The holiday spending struggle
Let’s face it—between gifts, travel, meals, and events, holiday costs pile up fast. While those thoughtful gift exchanges create warm, happy moments, the cold reality of starting January with a maxed-out credit card can quickly overshadow the joy.
Did you know that many Canadians start the new year with holiday debt? This year, it’s time to break the cycle.
Your game plan: building a holiday budget
Start by defining what you can comfortably spend across categories: gifts, travel, food, and entertainment. According to ReviewMoose, nearly 47% of Canadians create a holiday spending budget, but sticking to it is where the real challenge begins.
According to CNBC, only 1.5% of your annual income should be allocated towards your holiday budget. Let’s look at how you can maximize on your budget, without overspending.
1. Set a Realistic Spending Limit
Setting a spending limit is the foundation of a stress-free holiday budget. Experts recommend allocating 1.5% of your annual income for holiday expenses. For example:
- If you earn $50,000 annually, aim to spend no more than $750.
- If your budget feels tight, prioritize essential expenses like gifts for immediate family over discretionary items like lavish decorations.
Tips for Sticking to Your Limit:
- Use the “50/30/20 Rule”: Allocate 50% of disposable income to needs, 30% to wants (including holidays), and 20% to savings/debt repayment.
- If you can, start saving early. Automate weekly contributions to a holiday-specific savings account to ease the burden when the season arrives.
2. Categorize Your Holiday Expenses
Breaking your budget into categories ensures every dollar has a purpose. Common categories include:
- Gifts: Make a list of recipients and assign a maximum spend for each.
- Food & Drink: Account for holiday dinners, parties, and even those extra coffees during holiday shopping trips.
- Travel: Include transportation, accommodations, and any additional fees like baggage or parking.
- Entertainment: Tickets to holiday shows, activities for kids, or a family movie night.
- Miscellaneous: Decorations, charitable donations, and cards.
Pro Tip: Prioritize categories that matter most to you. For instance, if travel is your priority, scale back on other areas like decorations or entertainment.
3. Track and Adjust
Staying on track requires regular monitoring. Here’s how:
- Use Budgeting Tools: Certain apps allow you to set limits, track expenses, and get alerts when you’re close to exceeding a category.
- Review Weekly: Take 10 minutes each week to compare your actual spending to your budget. Identify any areas where you’re overspending and adjust accordingly.
Importance of Flexibility:
Unexpected expenses are inevitable—like finding out your child’s teacher is hosting a gift exchange. Build a 10% buffer into your budget for these surprises. Flexibility allows you to manage last-minute changes without stress.
Additional Tips for Success
- Envelop System: For cash spenders, divide cash into envelopes labeled by category to visually track spending.
- Digital Alerts: Enable alerts on your app or credit card to notify you of transactions over a specific amount.
- Account for Small Items: Even small expenses like gift wrap or stocking stuffers can add up.
Smart Holiday Hacks
Cashback is king. Using credit cards like the Neo World Elite® Mastercard can give you cashback on holiday purchases—a win for your wallet. Shop early, save big. Avoid last-minute markups. Start now to snag deals and avoid panic-buying. Focus on meaningful gifts. Sometimes, it’s the thought—not the price tag—that counts. Personalized gifts or shared experiences go a long way.
Rethink the holidays
Think strategic shopping. Many Canadians are on the look out for deals and smart shopping can significantly reduce costs. Plan your purchases around major sales days and consider using loyalty points or cashback credit cards for extra savings. Gift cards, which are still among the most popular presents, can double as flexible, cost-effective options for your list.
Get creative with gifting. The holiday spirit isn’t about how much you spend. Think meaningful instead of monetary: bake treats, craft DIY gifts, or offer your time through services like babysitting or home-cooked meals. Not only are these gifts thoughtful, but they also help keep expenses in check.
Trim Non-Essential Costs. Canadians are feeling the pinch of inflation, with 35% worried about affording gifts and 31% about rising credit card debt, according to Deloitte. Consider hosting potluck-style gatherings instead of footing the bill solo or dialing back on decor and focusing on cherished traditions instead.
Start planning for 2025 now
Holiday expenses aren’t unexpected—set aside funds throughout the year in a dedicated savings account. Even contributing $20 a week could save you $1,040 by next November, putting you ahead for next year’s festivities.
The holidays should leave you with happy memories, not financial regrets. By budgeting smartly, prioritizing meaningful spending, and taking advantage of tools like cashback rewards, you can enjoy a stress-free season and step into 2025 with confidence.
As reported by Deloitte Canada: https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/strategy/ca-hro-2024-aoda-en.pdf
As reported by Review Moose:
https://reviewmoose.ca/blog/holiday-spending-statistics/
As reported by CNBC: https://www.cnbc.com/select/holiday-budgeting/#:~:text=In%20more%20normal%20times%2C%20the,on%20holiday%20gifts%20and%20travel.
