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Just like Santa, it’s all about your list

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With back to school behind us and Thanksgiving upon us, it’s time to start thinking about Christmas. Yup, I said it out loud. Before you know it, the winter holiday season and Dec. 25 will be here. That means you only have 11 weeks, or five bi-weekly pay periods to prepare.

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Christmas and the holidays can be special without breaking the bank or going into debt. Some people even say their holidays are more special when the commercial aspect is minimized or eliminated.

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But, just like Santa, it’s all about your list. Decide who you really need to buy for. Sure, it’s nice to give presents to everyone. But if your generosity comes at the expense of your budget, the good feelings you get from giving will turn to resentment when the bills pile up in January.

Now, take that list of people you want to buy for and make a budget based on what you expect to spend per person. Once you have the total, divide by the number of pay periods between now and Christmas. For example, if your gift giving budget is $500, then you will need to save $100 per paycheque between now and then.

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Follow this same process for any other big holiday expenses you’ll have, such as meals, travel or winter entertainment and recreation.

To come up with the bi-weekly savings you’ll need, review your regular expenses to see if any of them can be temporarily cut back over the next 11 weeks. Eating out, picking up take-out food, drinks after work and the streaming service that won’t be playing your favourite holiday shows are a few things that many of my clients identify as cuttable expenses while saving for a goal.

If there’s just not enough time to save a sufficient amount to buy everything you want, you may have to get creative to avoid putting Christmas on credit.

One good option is to suggest to your family that you all draw names this year, so that each person buys only one gift for one person. With my own kids grown, we tried doing this last year, and it saved everyone money and a lot of the time it takes to find perfect gifts for everyone. Drawing names worked so well for us last year that the grandmas want to get in on the draw this year.

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If you really love the act of holiday giving, consider putting your skills to work and treat your loved ones to handmade presents. Even if you aren’t super handy, check online for ideas with easy-to-follow instructions. Who doesn’t love receiving homemade Christmas baking? Factor the cost of ingredients into your budget and involve your kids. This will teach them about giving and helps keep their focus on the real meaning of the season.

One of my favourite parts about Christmas is spending time with family and friends. Instead of exchanging presents, why not have someone over to share a meal or dessert together? The memories made while enjoying time with friends or family can be worth far more than any present.

If you’re responsible for hosting Christmas dinner and aren’t sure how to manage it with the rising cost of food, ask your guests to bring their favourite holiday dish. This can be a great way to try different foods as well as provide some necessary holiday budget relief.

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But if you really love being able to provide that traditional meal, be sure to use the five paycheques you have between now and Christmas to start stocking up on all the ingredients for your feast. Watch for sales. If your freezer has space after Thanksgiving, why not make that purchase early? It will be one less thing to put strain on your budget in December.

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For your kids, consider giving them a budget for the items they put onto their wish lists (works for parents, too). Focusing on what you can afford is much easier than disappointing them or turning their one big wish into a family gift.

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On the other hand, if it’s a big gift the whole family can enjoy, such as a game system, and it fits within your spending limit for all your kids, then consider giving it as a shared present. Just be sure to buy whatever is needed so that everyone can enjoy it right away.

With some well-thought-out planning, Christmas and the holiday season can be both merry and money-wise. Set your savings goals and look for ways to help kids learn about managing money effectively, even during what is traditionally an expensive time of year. Start now at Thanksgiving and talk to family and friends about cost-conscious gifting and affordable new traditions. Everyone will be happy you did.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 25 years.

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Start the process as soon as your youngsters begin asking you to buy them things

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It has become crucial in the current climate of rising costs to learn savvy money skills to balance our budgets and not rely on credit to cover any shortfall. But it’s not just a good idea for us to learn how to better manage our money, it’s just as important to teach our kids.

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You can start this process as soon as your kids start asking you to buy them things. This means they’re ready to start learning about money, but before they can spend, they must have a way of earning it. An allowance is often the first way kids receive money. Decide if you want to link it to age-appropriate chores or give it strictly as a learning tool. I found that linking my kids’ allowance to chores took a lot of tracking before I could pay them.

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Depending on what you can afford and what your child is expected to do with their allowance, a weekly 50 cents to $1 per year of age is a good rule of thumb. This means your four-year-old would get $4/week and your 10-year-old $10/week.

Then choose how you want to administer the allowance.

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It will be more of a visual lesson to start out by giving them cash to put in their piggy banks. As they get older and can grasp the concept of electronic banking, you may want to switch to weekly automatic transfers to their own account, or one that is joint with you.

Next, encourage your child to come up with a goal for something they would like to buy. This is a good way to teach them about savings and delayed gratification, which is worth mastering before they’re old enough to have access to credit.

For example, let’s say the toy they want is $29.99 plus tax. In Manitoba, this comes to $33.59. Help them calculate how many weeks it will take for them to meet that goal given the amount they receive from their weekly paydays. Consider creating a savings goal poster to help them visualize their progress.

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As kids get older and more interested in spending, teach them the time value of money. This aligns how long someone must work in order to earn the money to buy an item.

We used this tactic with our own kids whenever they wanted a new item that was not a necessity. It helped them understand the value of our time and that there are limitations on what we can afford. If your child thinks they should be able to buy a desired item more quickly, this process will provide a good opportunity to teach them about working extra to get a more immediate payoff.

You can facilitate this by allowing them to do extra chores to earn additional spending money. However, avoid encouraging them to think they are getting paid to do their share of helping around the house. Instead, make sure they understand the work they are doing is beyond what is regularly expected and will, therefore, result in extra cash.

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Another option to help your impatient child reach their goal faster, and at the same time teach them about credit, is to lend them the money. Prior to doing so, be sure to set out the terms of the loan: how much the payments will be, when they must be made and how long your child has to repay the debt. Don’t set the payment so high that they don’t have any allowance left over for spending/saving each week.

For an older child, factor in a little interest to teach them about the cost of borrowing. Show your child their progress by tracking their payments until the loan is repaid. Let them know they can pay the debt off sooner if they wish, and if you are charging interest, this can teach them how doing so will reduce the total amount they have to repay.

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Regularly taking your kids shopping can help them learn how to be a savvy shopper. It provides a good opportunity for them to understand how much things cost, how comparison shopping works, how to budget within a limit and the role marketing plays on their spending choices.

Share your best tips and tricks with them while they’re still happy to come shopping with you, or have fun learning together how best to save up or wait for what you want to go on sale.

Above all, remember that your kids watch everything you do and learn their attitudes about money from you. Model good financial habits for them, but don’t worry if you don’t have it all figured out and find yourself relying on credit to supplement your income. Reach out to a not-for-profit credit counsellor for free money management advice. It’s never too late to learn.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 25 years.

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Small, seemingly insignificant purchases can be the difference between a budget that works and one that doesn’t

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We tend to put less importance on purchases that are only a few dollars: $2 here, $5 there, $20 for this fee or that and so on. However, those small purchases add up to big numbers in the big scheme of things, and can be the difference between a budget that works and one that doesn’t.

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Whether we have a monthly spending plan or not, many of our spending decisions are not actually decisions at all. Quite often, we don’t consciously think about how every individual purchase affects our bottom line. We run on autopilot with our spending, and tend to keep it running until we hit a certain dollar threshold.

That threshold looks different for everyone. It may be $10 for some, and $100 for others, but there is usually a point at which we turn off the autopilot and think a bit more intentionally about the money we are about to spend.

For example, we may think nothing of grabbing a snack when we hit the checkout at the grocery store, or even subscribing to a new streaming service with a cheap monthly fee. But when it comes to spending $150 on something, we may double check our account before tapping or clicking.

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Alternately, we may note and be very aware of these small expenses or purchases, but rationalize them: “It’s only $2,” or, “I don’t spend a lot, so this small amount is OK,” or, “I owe so much anyway, what’s a little more?” Sound familiar?

These small, seemingly insignificant purchases are what we like to call financial death by a thousand cuts. Any one small purchase or expense in and of itself won’t be enough to make or break a budget or hinder your financial goals. But add up all these small, individual spends from all areas of your life throughout the year, and they can become very significant when you consider what the money could have done for you.

Given the choice, would you rather spend $1,000 on drive-thru coffee or put $1,000 in a registered education savings plan that has government contributions and will earn, at the very least, interest?

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If you’ve ever wondered where your money goes and how those little financial cuts are injuring your budget, tracking your expenses is a great exercise. The numbers don’t lie. Tracking your expenses, even for a short time, — say, a month — will reveal your spending habits and make you aware of what you’re spending your money on, where you’re spending it and how much you’re spending.

Once you know this, you can make more informed decisions about where you want your money to go and what you want your money to do for you.

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As the saying goes, knowing is half the battle. Knowing your spending patterns and habits can go a long way toward making changes to those behaviours. Impulse, emotional or convenience buying can be some of the biggest challenges in the war against needless spending.

A great defence against impulse or emotional purchases, whether online or in person, is to leave items in your cart (or at the store if you are shopping in person). For small online purchases, leave it in the cart for 24 to 48 hours, and even longer for bigger purchases. Delaying the gratification of the impulse buy allows you to pause and intentionally determine if your purchase is a want or a need and whether you can afford it or not right now.

A little planning goes a long way when it comes to being aware and choosing how we want to consciously spend our money. Convenience isn’t just next-day delivery. Convenience costs occur when, for example, we don’t plan for dinner and end up going through the drive-thru or ordering in. It’s when we opt for pre-cut, pre-packaged foods instead of make-your-own options.

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Planning and leaving time in your schedule, even just once in a while, can ultimately boost your cost savings.

Portioning your own snacks, cutting your own veggies, sticking to a meal plan, shopping with a list and bringing lunch to work can help address those extra costs associated with convenience food purchases.

Remember these tips as you work on your spending plan:

  1. Tracking expenses shows you where you might be overspending or what areas you may be spending more on than you thought.
  2. Planning ahead, especially around drinks, meals and snacks, helps avoid convenience costs.
  3. Creating a plan, and giving every dollar coming into the household a job to do, allows you to align your spending with your financial goals.
  4. Being aware of your emotions as they relate to your spending habits can help you curb emotional and impulsive spending.

The cost of essential items is still rising, but the reality for most of us is that our incomes are not rising at the same rate. The little things do matter when it comes to our finances. And they most certainly add up.

Sandra Fry is a Winnipeg-based credit counsellor at Credit Counselling Society, a non-profit organization that has helped Canadians manage debt for more than 25 years.

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“A potential explanation for this phenomenon is that consumers with mortgages in areas with high house price growth have been shielded from insolvency over the past few years by the growing value of their home (e.g. the ability to extract home equity to consolidate their debts or sell their home to pay their debts),” it states. “Conversely, non-mortgage holders in hotter housing markets have missed out on the benefits of house price appreciation, while still bearing the costs associated with living in affordability-challenged areas (e.g. higher rents).”

In line with this possible explanation, the memo says, is that in British Columbia and Ontario, home to the pricey real estate markets of Vancouver and Toronto, the share of insolvencies filed by mortgage-bearing consumers had fallen sharply. Meanwhile, in the rest of Canada, those insolvencies had remained steady.

Recent public-opinion surveys have suggested that consumers have not forgotten about the risks posed by rising rates either.

A Royal Bank of Canada “Home Buying Sentiment Poll” found 45 per cent of those polled were concerned about interest rates in the coming year. And a recent poll conducted by the Credit Counselling Society, a non-profit that aims to help consumers manage their finances better, found that 31 per cent of Canadians it surveyed were having trouble paying down their debt, even with interest rates so low.

“If consumers don’t make a concerted effort to reduce their … non-mortgage debt over the next two to four years, and then rates start to go up — that could have a material impact on mortgage rates, which could have an impact on rental rates — then consumers will put themselves in difficulty,” said Scott Hannah, chief executive of the CCS, in an interview. “So that’s the challenge that we throw out there for consumers is, if you don’t get your financial house in order over the next three to five years, pay off your consumer debt, set aside three to six months’ worth of living expenses for emergencies, you’re going to be susceptible to the next thing, whatever that is.”

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Consumer debt in Canada rose 3.8 per cent in the third quarter to $2.041 trillion, driven by the surging housing market and new auto loans, Equifax Canada’s latest report reveals.

Mortgage balances were up 6.6 per cent from the year before and the average new mortgage loan rose 8.6 per cent to exceed $300,000 for the first time.

“Homebuyers are largely the reason why we’ve crossed over the $2 trillion threshold,” said Rebecca Oakes, AVP of Advanced Analytics at Equifax Canada.

New auto loans were also up 11.7 per cent from last year and average auto loan amounts are at their highest level in four years. Oakes said car prices have increased as manufacturers have not been able to keep up with a rise in demand during the pandemic. There is speculation that consumers are buying more cars to avoid public transportation.

Overall average consumer debt rose to $74,897, up 3.3 per cent from the same period last year.

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