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Being strategic about how you save, shop and spend will keep you in the black this season.
For many Canadians, managing debt is a year-round challenge. Common tips tend to be simplistic or downright insulting (we’re looking at you, “skip your daily coffee”). Staying on top of your finances gets even more difficult during the holidays, when everywhere we look there are messages urging us to spend. If you really want to avoid more debt this coming season, you’ll need to pay attention to three major areas: saving, shopping and credit card use. It is possible to participate in the most wonderful time of the year without adding financial stress.
Have you budgeted for holiday shopping?
— MoneySense (@MoneySense) November 10, 2022
Now is as good a time as any to create a savings habit, where you put a percentage of your earnings away each month. Your first priority is to build an emergency fund, which should be big enough to cover all of your expenses for three to six months. You can use the same strategy to save up funds for your holiday spending. If you’re just starting now, all is not lost—you’ve still got some time to set aside money from each paycheque before your January and February credit card bills. And it could be the perfect time to reap the rewards from holiday shopping with your cash-back credit card, too.
How and when you shop for holiday gifts will determine to a large degree how much you pay. Shop early to make sure you don’t get stuck paying top dollar.
If you have the storage space, you could even consider keeping an eye out for gifts throughout the year. Most products cycle through high and low sales seasons, so an unbelievable deal is often just a matter of timing. If you have a shorter purchasing timeline, the Black Friday and Cyber Monday sales in November are excellent opportunities to get the perfect gifts at the right prices.
No matter when you’re buying, though, it’s important to do your research and shop around for deals. Price comparison apps help you scan local flyers in a single interface. If you’re shopping online, consider using browser extensions that automatically find the best coupons and promotions. Additionally, many major retailers have their own apps with discount alerts, or they might offer discounts or free shipping if you subscribe to their newsletter.
Once you’ve identified the products you want at the very best prices, make the most of your purchases by paying with a rewards credit card. If your goal is to manage credit card debt, a cash-back card can be a great help. You could also earn points redeemable in a rewards program for travel, merchandise or gift cards, or get savings through credit card partner retailers. Whatever your favourite loyalty program, make the most of it with your holiday spending.
Many programs also let you redeem your points for gift cards or merchandise, which you can give as presents during the season. Many rewards programs let you trade points for electronics, household items and other products, and you can please even the pickiest people on your list with a gift card. And if you’ve got holiday travel plans, use your travel rewards to book your trip—and keep more cash in your pocket.
First, make sure you’re using the best credit card for you. If you’re already carrying debt, your first priority will be to get that under control. A balance transfer—transferring debt from a higher-interest card to one with a low-interest promotion—can be an effective way to slow the accumulation of interest. If you routinely carry a balance, a low-interest card can help. Another strategy is to use a credit card with an installment plan such as CIBC Pace It, which allows you to pay off large or unplanned purchases at a lower interest rate.
Whatever your situation, you should have a repayment strategy in place. If you owe money against more than one card, acquaint yourself with the avalanche method for paying off debt: you make the minimum payment on all your cards and apply whatever funds you have left to the card with the highest interest rate. Alternatively, the snowball approach involves focusing your payments on the smallest debt first. With the avalanche repayment plan, you’re trying to reduce the amount of interest you’ll pay; whereas with the snowball approach, you can score wins (such as paying off the entire balance on one card) faster.
Between gifts, travel and socializing, the holiday season can be an expensive time for Canadians—and the last thing anyone wants is increased financial stress. By taking a strategic approach to saving and shopping, and by using the best financial tools and credit cards for the job, you can have a budget holiday that feels like a splurge.
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers.
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would lime to know more how to paid off my credit cards
For many years we have limited ourselves to just two credit cards, Visa and Mastercard. Over time the majority of our spending is on MC. Both cards are paid in full every month. Major spending goes on a secured line of credit which is paid off over time. The message here is that you can control spending if you wish, it just takes a bit if discipline.