How Not To Screw Yourself Over Financially During The Holidays

As the most wonderful time of the year nears again, a not-so-wonderful thought: Though nearly half of Canadians are within $200 of not paying their bills each month, the average Canuck plans to drop more than $1,500 during the holiday season.

But it doesn’t have to be that way, says Shannon Lee Simmons, a Toronto-based financial planner, life coach and the author of Worry-Free Money: The Guilt-Free Approach to Managing Your Money and Your Life. We grilled her on how to ditch the cash crunch—and maybe actually enjoy—this shopping season.

So I should have planned and saved all my Christmas money already, right?

Well, in an ideal world, yeah. But in an ideal world we’d all have lots of money and not have to worry about this at all. If it were last January, I’d say put a small amount away per month and then you won’t have to think about it. But if it’s 20 days till Christmas, that’s not helpful. Then I’d say get all hands on deck and be realistic about what you’re going to spend.

Do I have to get out an Excel sheet and chart a budget?

No! If anything, I am anti-budget. This doesn’t mean that you can just spend whatever, but if you start with rigid limits—this person’s gift is $20, that person’s gift is $50—you set yourself up for failure. Then you’ve tried to be financially responsible and failed, so you give up.

How do I know how much I can afford?

If you’re going to overspend—which happens all the time, holidays or not—make sure it won’t permanently increase your fixed costs of living to the point of unaffordability. With the holidays, to avoid a massive credit card hangover, I say make sure you can pay it off within two months. If you can reduce your daily spending in the new year for two months to cover it, that’s okay. But don’t carry that balance into March.

Then I can spend that on whatever I want?

Yes, add everything up and make yourself a hard limit. Say, “I’m able to spend $1,000 and no more.” I don’t care how you spend it—maybe it’s all one present for one person, maybe there’s a whole lot of cheese—but don’t limit yourself within this hard limit. And remember the auxiliary costs of merry-making, which I see a lot of people forget about, like wine and clothes and everything else.

It is an excellent time of the year for a new party dress, no?

Yes, there’s a ton of pressure to look and act a certain way at social obligations—like if you don’t wear something fancy or buy someone a nice gift, they’ll think things. I call this the "inadequacy influence"—when you spend money you can’t afford to prove a point. I also call this "unhappy spending.”

What makes spending happy or not?

When you invest in anything, you’re looking for a return on investment. When you spend money, make sure you get a high emotional return. You only have so much money within your hard limit, so don’t spend it on things that make you feel guilty, resentful, frustrated or angry. You want to limit that spending to make room for things that make you feel good—even if you’re spending less.

But how can you avoid unhappy spending?

Be honest. Say thanks, but you’re on a budget this year and then—this is the key here—ask what’s possible. Don’t say a hard “No, I’m not going.” But put the ball in their court. Maybe it’s a Secret Santa, or a price cap, or maybe you plan to spend time together instead of buying them another throw for their apartment. I bet you that person’s relieved, excited and wants to do it too. Because when we’re all just buying for the sake of buying, everyone’s frustrated.

And with all this money I’ve saved, what should I do differently next year?

The new year is of course a great time to start fresh and build up that savings account. By the time the holidays come around next year, you won’t be stressed one bit. You don’t need much—$40 a month will become $500 very easily. But go easy on yourself too if you’ve got a $500 hangover to pay off. It’s not so bad. Maybe chill out and stay home for a while.

Originally published December 2017; Updated October 2019.