Do this now to avoid the dreaded January debt hangover

People walk among Christmas trees and decorations in the Potsdamer Platz Arkaden shopping mall on November 30, 2011 in Berlin, Germany. (Photo by Sean Gallup/Getty Images)

The holiday season is expensive and often results in Canadians experiencing the dreaded January debt hangover. Many of us get nervous opening up our bills in the New Year to see how much damage we did to our bottom line over Christmas.

Depending on what survey you look at Canadians budget to spend anywhere from $815, according to a Scotiabank survey, all the way up to $1,550, according to the latest available BMO Holiday Outlook. For many, the spending can be much higher with the biggest expenses going towards travel and gift buying.

Whatever your average spending is, take the initiative now to have that money in the bank before the holiday season starts. Doing this prudent task will help you have a stress-free January as you wait for the credit card bills to come due.

There are several proactive financial steps you can take right now.

Look back

The first thing you should do is go back and see what you spent in the last three years during the holiday season. Pull out your old credit cards statements from October to December for 2014, 2015 and 2016. You can call your credit card company and request a copy if you don’t have it. Mark everything you associate with holiday spending. Gifts, food, travel, home décor.  Ask yourself: If Christmas was cancelled, would I still buy this item or spend money on this service? This will give you a good idea of what you personally spend on the holidays every year, rather than what a survey tell you.

Make a plan

Start organizing for the holiday season now. Some years might be more expensive than others because you bought more home décor or travelled to see family. Other years might be cheaper because you attended fewer holiday parties. Figure out what this year will probably cost you. List the Christmas parties you will be attending and hosting. Are you going out for New Year’s Eve? Any plans to get out of town? How many gifts do you expect to buy? Are there any new additions to the family that you’re buying for this year? All of this will help you build a realistic budget of what you will need to get through the 2017 holidays.  Compare it to years gone by and if it’s pretty close, you know you have a realistic number to work with.

Start saving now

Once you have that total, say for example it’s $800, divide it by the number of weeks left until the end of December. If there are 8 weeks left, divide $800 by 8, which is $100. That means you should be socking away at least $100 a week to pay your holiday bills. By doing this, you know the money is already in the bank, so when the statement arrives in January you have no stress wondering where that money will come from. This also will help you stay on budget, as you will know how much money you were able to save. Blowing your budget is easy: a recent RBC report revealed last year Canadians overspent by an average of $403.

Shop early

Much to the chagrin of shoppers, retailers start putting out holiday items early (I saw Christmas trees up at a major box store in August once). While many may cringe over holiday décor being up too soon, this is actually a huge bonus for anyone trying to pace their spending. Start looking now for items that you know you will need during the holidays. Buy a few gifts that you have on your list. At this time you are more likely to make rational decisions that will save you money, rather than trying to grab and go to get you’re shopping done in December. Shopping in haste usually ends up costing you more.

Once the holidays are over you won’t feel the dread of those January bills because you know you’re ready for them. So while the rest of your family and friends are nursing a January debt hangover you can start making your 2018 spending (and savings) plans right away.

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