two friends wearing santa hats and holding gift bags as they go window shopping during the holiday season

How to Avoid Falling Into Debt During the Holidays

Here’s what you need to know about the increasingly serious issue of consumer overspending and how to avoid falling into debt during the holidays!

It can be hard to curb spending during the holidays. Indeed, presents and last-minute purchases will add up quickly. In 2018, the Retail Council of Canada estimated that Canadians spent on average $675 during the holiday period, with 1 out of every 3 of people overspending.

The problem is that this is indicative of a larger debt problem in Canada. Here’s what you need to know about this increasingly serious issue and how to avoid falling into debt during the holidays.


Holiday Spending and Debt: a Rigged Game

It’s normal to want to splurge a little during the holidays. However, a 2018 report by MacLean’s cites that two-thirds of Canadians don’t save money to account for their holiday spending, which means most of them use credit cards to cover their costs. This wouldn’t be a problem, were it not for the fact Canadian households are already in debt.

During the last decade, debt growth has outstripped wages. In 2019, Statistics Canada reported that the average household debt had risen to 170% of disposable income. This means that, for every dollar they earn after taxes, the average Canadian owes $1.70.

The result is that taking on substantial debt during the holiday season may push some people to their debt limit or beyond. In fact, licensed insolvency trustees report seeing a considerable uptick in consumer proposal and bankruptcy filings in the first four weeks of January, indicating that the consequences of excessive holiday spending can sometimes be severe.

While the Toronto Sun reports that Canadians are trying to stick to their budgets this year, this may not be as easy as it seems.


The Deal with Special Deals

There are many factors that make it difficult for people to limit spending. First, the period that stretches from American Thanksgiving to New Year’s Day includes Black Friday, Cyber Monday, the holiday rush and Boxing Day. While characterized by substantial discounts and deals, these events can lead to irresponsible spending.

A 2017 Coinstar survey found that 70% of respondents fully expected to go over budget during Black Friday. While this survey was conducted in the United States, Black Friday and Cyber Monday are now decidedly Canadian traditions as well.

Simply put, attractive deals make is easier to overspend.


The Impact of a Tense Year

According to Anne Jardine, a retail and marketing specialist from Washington, D.C., 2019 was a turbulent year for many and it’s likely that this will have a serious impact on holiday spending. Climate change, Brexit, the tense political situation in the United States and the demonstrations in Honk Kong and elsewhere all contribute to a general feeling of precarity, which may prompt people to spend more.


The Psychology of Spending

Another factor to take into consideration is the difference between spending for oneself and spending for someone else. Many people tend to feel good about spending money on their loved ones, but this can override the desire to stay within their budget. Unfortunately, this type of spending can lead to taking on a substantial amount of debt. A 2018 survey by Canadian insurer Manulife found that 60% of respondents were willing to go into debt during the holiday season, while 25% of them said that the resulting financial stress has a measurable impact on their mental health.


The Psychology of Debt

Taking on holiday debt can make your financial situation hard to manage and lead to serious stress. For some people, this stress can manifest as full-blown anxiety symptoms, which can take the form of further overspending to get temporary relief. More commonly, it interferes with the ability to sleep and work, which can make it even harder to manage debt.


How To Avoid The Holiday Debt Trap

The fact is that most people need help get through the holidays. Here’s what you should do:

  • Budget. The key is to not treat your budget as something to check after you make purchases, but rather as a tool to determine what you can afford beforehand.

  • Get counselling. Attempting to tackle a burdensome credit situation can feel like a guessing game without proper guidance. Seeking credit counselling early is also a good way to have an objective view of your financial situation, which will help you come up with a solid budget.

  • Act fast. If you’re worried that you no longer have a handle on your debts or spending, immediately seek the help of a licensed insolvency trustee before it’s too late and your situation becomes worse. They can help you assess your situation and come up with a plan of action.


We Provide Debt Help in the Ottawa Area

Whether you want to be prepared to weather the holiday season spending or you need help recovering financial independence, you can trust the licensed insolvency trustees at D. & A. MacLeod Company Ltd. The initial consultation is always free, so contact us today to make an appointment.