For many years we have been helping people deal with their debt and we have noticed repeating patterns of financial problems that people encounter. One consistent problem is the accumulation of a lot of extra consumer debt around holidays and especially Christmas. Year after year in late January we are flooded with calls for help with Christmas debt caused by overspending. Based on what we have learned, we want to share with you a few tips and tools to help you avoid this situation.
First of all, if this recently happened to you and you find yourself stuck in a mess of high interest credit card debt, please contact us for a free consultation explaining your options for reducing the interest or consolidating the debt. The details are covered in our many other blogs and info pages, so we will not go into them here. This blog is more about how to permanently fix the problem.
HOW DID WE GET HERE? – first ask yourself how did you end up spending too much on Christmas. It’s important to understand why and how so that in the future this can be corrected. Did you overspend because of feeling obligated to purchase presents for extended family or did you simply get caught up in all the excitement and commercial marketing of the holiday season?
HOW DO WE AVOID THIS NEXT YEAR – If you are one of the ones who felt obligated to purchase presents, even though you did not have enough money, then we suggest you talk to your family about this. At first it may feel uncomfortable to have to tell family members that next year you will not be buying presents for the full extended family but your financial future is at stake. What a lot of financially savvy families do for extended family gifting is simply plan it out so it works for everyone, no matter what each individual’s income is. What we have seen work well is this:
GIFT EXCHANGE – The parents purchase presents for their own immediate family only; and no extended family gifts except some planned ones. The planned ones are a few extra gifts (one gift per person in your own immediate family) with a set price limit for a fun “Gift Exchange” game. Then when the big family gathering happens, everyone brings their one “gift exchange gift” to the game and puts in in the pile. Search the internet for the rules on how to run a fun gift exchange. These games can be a ton of fun and everyone leaves with a gift, and no one needs to overspend. This can help people save literally thousands of dollars.
My own family has done this gift exchange game for many years and everyone gets into the game and has fun, and there is a lot of of healthy competition and hearty laughter. Not only is it fun, it is cheap since now you only need to buy one present for a family gathering of any size and with a set price.
If you feel that leaving the family gathering with only one gift each is chintzy, don’t forget that many gifts are wasted when people buy many gifts for many family members, also many gifts are even unwanted or unneeded. How is your great Aunt supposed to know what type of sweater is in style for your generation and what you might like? So, doing the gift exchange ensures everyone spends less money, yet everyone gets a gift, and usually one they want (since it’s a game to get the gift you want) and everyone has fun.
If the oldest generation (grandparents for example) can afford to spend a bit extra, then what some families do to spice it up a bit, is have the Grandparents simply purchase a bunch of small stocking stuffer style gifts for the Grandkids only. This way the shared multi generation family gathering, Christmas can be busy with lots of present openings, the kids get to have a lot of fun and small presents, and everyone gets something from the exchange, and your immediate family does the normal gift giving. So all in all there are still a lot of presents, but it really helps control spending for those more distant family members and for the larger family gatherings.
Here are some other simple steps that can really help you avoid Christmas Debt:
1. Plan Ahead – sounds simple yet it feels like very few people actually plan for Christmas spending. Simply figure out a rough budget for all Christmas presents for everyone in your family. In addition, budget for extra meals and the extra eating out you might commonly do over the holidays. Take the estimated total and divide it into 12 months and now you have your monthly amount you need to set aside each month to plan ahead for next years’ holiday season.
2. Separate Account – we have seen this planning ahead budget work best when you open a separate savings account and put the monthly installment money in there. The reason is, it is just too easy to spend the money ahead of time on something else if it is simply in your regular chequing account. By setting the money aside into a different account something emotional happens where it feels like the money is gone and it is quickly forgotten about until Christmas next year.
By employing step 2 and 3, Christmas can change from a time of stress and overspending to a time of celebration and free enjoyment of spending your hard earned and “well planned” gift money from your “Christmas gift savings account”.
I can almost guarantee you that it will “feel” 100 times better emotionally when you buy gifts with your own saved money vs borrowed high interest credit card money. Spread the word, tell your family about your plan and possibly help them avoid this common but completely avoidable mistake as well.