Christmas bills can lead to debt
By: Anna Borowiecki
| Posted: Saturday, Dec 07, 2013 06:00 am
It’s the Christmas season, a time marked by an abundance of oil money buoying up Alberta’s consumer confidence.
In the run-up to Christmas, spending is rising and retail sales are strong. Glitzy store displays create a seductive shopping atmosphere that can result in a January debt hangover.
However, many local shoppers are fighting seasonal temptations with the best weapon they have: cash.
Michele Bishop of Villeneuve is an organized shopper who tracks her spending carefully.
The medical receptionist draws up a gift list, creates a budget and tries to pay cash for everything. She estimates her budget is at $1,000 – roughly the same as last year.
“I prefer to go in stores and look at things. You see what you get and you know it will be here before Christmas,” said Bishop, a mother of three.
Credit cards are convenient she agrees, but uses them only for the odd online purchase.
“They can be a big surprise. You don’t realize how much you’re spending and I don’t like that.”
A 2013 BMO Holiday Spending Outlook special report projects that the average Canadian will spend $1,810 this holiday season. Albertans are the biggest spenders at $1,939.
These figures, not including monthly mortgage payments, take into account gifts, trips, entertainment, decorations and miscellaneous items.
An RBC Canadian Consumer Outlook has a slightly more modest spending scale. RBC’s overall holiday projection for Canadian gift givers is pegged at $1,192.50. Alberta figures are slightly higher at $1,325.
On its own, these figures are not alarming. However Brian Betz, a counsellor at Money Mentors has deep concerns. (Money Mentors is a non-profit agency that assists people in restructuring their finances.)
“Fewer than half have a plan for paying off all their bills,” Betz said. The RBC report notes that only 54 per cent of Canadians will cover their seasonal expenses using cash or debit cards.
“Statistics show that 50 per cent of people live paycheque to paycheque. It’s a horrendous statistic to my mind,” said Betz.
Consumer counselling agencies tend to see up to a 25 per cent uptick in the number of people needing debt restructuring in the months of January and February.
For instance, in January 2012, Money Mentors received 12,000 web hits. An average month usually sees about 8,000 to 9,000 hits, an indication that for some families Christmas is more costly than anticipated.
No one wants to be a Grinch, but racking up steep bills due in a few weeks can be stressful. To avoid unnecessary headaches, Betz suggests creating a spending strategy that avoids impulse buying.
“Make a plan and live within your means. Pay in cash. When I hand over a $20 bill, it hurts more than punching keys on a machine.”
Len and Dayna Cummings of Morinville have discovered a scheme that prevents a wild spending spree. Below the Alberta average, they keep Christmas spending at about $700.
“We wait to the end of the month and with what we have left over we buy presents. We usually start in October,” said Len adding the couple also pays cash.
Betz further encourages families to cut down on purchases.
“Talk to the family about how you gift. Rather than buying something for everybody, see what you can do with non-cash gifts. Give people your time. Offer to shovel a sidewalk.”
Canadian consumers have driven the nation’s economic growth for years and many businesses are dependent on the seasonal boom. But with a bit of modest tightening, consumers can still claim to prop up the economy without putting their financial status into a deep freeze.