6 money moves to prepare for the holidays—with a recession to come

1. Made your list? Check it twice—against your bank account

Maybe you’ve set a holiday shopping budget and are determined to stick to it. But even if you’re planning to cut back compared to last year, ask yourself if you can really afford to spend that much. How will the withdrawal of this amount from your bank account affect your ability to pay for monthly expenses after the holidays? If an unexpected cost comes up, or if your income is interrupted, will you have an emergency fund to draw on? We all want to give generously, but make sure your financial needs are covered, too.

2. Have a strategy (or three!) for disciplined holiday spending

Even with a budget in mind, heading into the holiday season is like walking through a gauntlet of speakers blasting messages about the best, once-in-a-lifetime sales you absolutely cannot miss. Fortify your resistance against overspending with these tactics:

• Lean towards less: The pandemic showed many of us that we can live with less. Before you buy, consider whether the gift is truly useful—or just potential for clutter. A great bargain that goes unused is ultimately a waste of your hard-earned money.   

• Shrink your list: You don’t need to buy a gift for every person you know. But when a card isn’t enough, homemade gifts like cookies or knitted scarves could be great options. 

• Make it personal: Think about the best gifts you’ve ever received. They’re probably the ones that showed the giver spent time thinking about your personal interests and what makes you happy, or simple gifts that celebrate moments you’ve shared (a framed photo, for example). Small, thoughtful gifts are often more valued that expensive ones.

3. Have the “money talk”

Financial literacy is one of the best gifts you can give your children. Talk to your family about the possibility of a recession and why it’s important to be more conservative with your holiday spending this year. This conversation doesn’t have to be bleak or scary. Explain that recessions are a normal part of economic cycles and that families can prepare themselves by creating a budget that allows for both spending and saving.

4. Get creative with family gift-giving

Do you really need to buy a present for all your siblings, their kids and that uncle who always spends Christmas Eve with you? You may want to pare down the shopping list—yours and everyone else’s—by suggesting a Secret Santa gift exchange this year. And, to ease the pressure that many Canadians feel to buy expensive presents, set a spending limit or split the cost of larger gifts with a group. If you have adult kids, you could suggest opening gifts after Boxing Day, when you can get them what they want at a steep discount. Or, if your family is open to an even bigger change, you could consider giving no gifts at all.

5. Shop with cash

Interest rates will likely keep rising in 2023, so what you put on credit this holiday season could end up costing you more in the long run, if you carry a balance. If you have a propensity to overspend, leave your plastic at home and spend only what you’ve earmarked in your bank account for holiday shopping—shopping with hard cash (or a debit card with access to only what you want to spend) can help you stick to your budget. If earning credit card reward points is important to you, then make sure you have a plan for paying off the bill in full next month.

6. Aim to come in under budget, and put that surplus away

Finding good deals is a talent. Prove to yourself how skilled you are by aiming to come in under budget. Forget the idea of “one for you, one for me” shopping indulgences. Put your unspent shopping money into your emergency fund or tax-free savings account (TFSA). You can do this either once you’ve done all your shopping or as you go along. The latter approach is often better because it prevents you from using money you saved on one purchase to splurge on the next gift on your list.

While it’s tempting to push away thoughts of economic uncertainty so you can focus on enjoying the holiday season, you’re not doing your future self any favours. Overspending now could mean more worry, fear and financial hardship later. By having a plan and doing your very best to stick to it, you can have a very merry Christmas indeed, followed by a happy, albeit slightly more frugal, new year.

Read more about budgeting:

• Budgeting for a less stressful holiday season
• Take control of your finances with these budgeting tips for young adults
• Tools and habits to stay on track with your money goals
• “COVID made me do it”: Taking stock of pandemic money decisions
• Buy now, pay later: Are installment plans a budget win or finance fail?

About Elke Rubach

Elke Rubach is the president and founder of Rubach Wealth, Holistic Family Advisors, a wealth management firm in Toronto that provides comprehensive financial planning for business owners, established professionals and their families.

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