Christmas Is Around the Corner! How to Save for the Holidays Without Going Into Debt
By Karen Fenske, Fenske Financial Coaching
For a lot of Canadians, Christmas does not end on December 25. It ends sometime in the spring, when the last of the credit card balance is finally paid off, just in time for the next round of expenses to arrive. This article is about making this the year that changes. You will learn what Christmas really costs when it goes on credit, how to save for it when the season is only weeks away, how to spot the newer debt traps like buy now, pay later, why your retirement savings should never become your Christmas fund, and what to do if you are already carrying a balance into the holidays. We will also look at what the research says about how paying by credit changes what we spend, and how coaching helps you build a holiday plan you can pay for in full.
What Does Christmas Really Cost When It Goes on Credit?
The price on the tag is only the first part of what you pay.
Suppose you put $1,500 of Christmas on a credit card charging around 20% interest and pay close to the minimum each month. That balance can take well over a year to clear, and the interest alone can add hundreds of dollars to the cost of the season. The gifts were opened in an afternoon. The payments can last through spring, summer and into the next fall.
There is a quieter cost too. A balance that does not clear by spring is still sitting there when the insurance renewal arrives, when summer plans come up, and when back to school lands in September. Then Christmas comes around again, on top of a balance that never quite reached zero.
Holiday Debt Is Not a Character Flaw
If this sounds familiar, you are in very good company. Holiday debt is rarely about recklessness. It is usually about a predictable expense meeting a plan that did not exist yet. That is a timing problem, and timing problems can be fixed.
How Do You Save for Christmas When It Is Only Weeks Away?
Starting in late October does not mean you have missed your chance. It means you are working with a shorter runway, so the plan needs to be simple.
Know your number. Look at last November and December's statements and total everything holiday related: gifts, food, travel, hosting, decorations, cards and the extras. This is the number you are planning for.
Decide what this year gets. Not what last year cost, but what you can pay for in full by the end of December. If those two numbers are different, the gap is your plan, not your failure.
Count your paydays. Divide this year's number by the paydays left before Christmas. That is your holiday transfer each payday.
Give it its own home. Move the money into a separate account named "Christmas," or take it out as cash and keep it in envelopes. Money with one job is much harder to spend on something else.
Run a short sprint. For the next eight weeks, trim one or two regular categories, such as takeout or subscriptions, and send the difference to your Christmas account. A short, temporary change is far easier to keep than a permanent one.
When the Numbers Do Not Match
If what you would like to spend is larger than what you can save, something has to give, and it is far better that it gives now than in February. Fewer gifts for people outside your inner circle. A name draw instead of buying for everyone. One special meal instead of three rounds of hosting. The people who matter most will notice that you are relaxed long before they notice a smaller pile of presents.
What Are the Newer Christmas Debt Traps?
Credit cards are no longer the only way to put Christmas off until later. Several newer options are designed to feel like they are not debt at all.
Buy now, pay later. Splitting a purchase into four payments feels manageable at the checkout. The trouble is that it rarely happens only once. Five or six small plans running at the same time can add up to a monthly payment nobody planned for, and missed payments can bring fees.
Store cards with a sign-up discount. Fifteen percent off today in exchange for a new card that often carries a higher interest rate than your regular one. If the balance is not paid in full, the discount disappears quickly.
"No payments until next year." Deferred payment offers on electronics and furniture can work if the full balance is cleared before the promotion ends. Read the terms carefully, because with some of these plans, if the balance is not cleared in time, interest can be charged all the way back to the purchase date.
Your line of credit or overdraft. Lower interest than a credit card, but debt all the same, and much easier to leave sitting there for years.
A simple rule covers all of them: if you would not put it on a credit card, do not put it on any of these either. They are the same decision in a friendlier outfit.
Why Should Your Retirement Savings Never Pay for Christmas?
When the pressure builds in December, it can be tempting to look at your retirement savings as a source of ready money. This is one of the most expensive ways to pay for the holidays.
RRSP withdrawals cost more than they look. Tax is withheld when you withdraw, the full amount is added to your income for the year, and the contribution room you used is gone for good. A $2,000 withdrawal leaves you with less than $2,000 in hand and can mean a bigger tax bill in April.
Pausing your contributions has a cost too. Skipping two or three months of retirement contributions to fund Christmas feels harmless, but those are dollars that would have been growing for years, or decades.
Your TFSA is not a Christmas account by default. If you deliberately saved for Christmas in a TFSA, using it is exactly the plan. If that money was meant for the future, borrowing it for December means your future self is paying for this year's gifts.
Christmas is one day. Retirement may be twenty or thirty years. Keep the money for each in its own place, and let Christmas be paid for by Christmas savings.
What Does the Research Say About Paying With Credit?
Cash has a feeling attached to it. You hand it over and it is gone. A card, a phone tap or a saved payment online removes most of that feeling, and with it one of the natural brakes on spending.
The Credit Card Effect on Willingness to Pay
In a series of experiments, participants were asked how much they would pay for items such as sold-out sports tickets. Those told they would pay by credit card were willing to pay substantially more, in some cases roughly double, than those told they would pay in cash. The items and their value were identical. Only the method of payment changed.
Always Leave Home Without It: A Further Investigation of the Credit-Card Effect on Willingness to Pay, D Prelec & D Simester, 2001
That does not mean you need to cut up your cards. It means the way you pay deserves to be a decision rather than a default, especially in the one month of the year when spending is most emotional.
What If You Are Already Carrying Debt Into the Season?
Many people are. It does not mean Christmas is cancelled. It means this year's Christmas has one clear goal: do not make the balance bigger.
Stop adding to the balance. Whatever you spend this season, pay for it with money you already have.
Keep up with every minimum payment. Missed payments bring fees and can affect your credit score at exactly the wrong time.
Plan a smaller Christmas on purpose. A deliberately scaled-back season you can afford feels very different from one that collapses in January.
Decide your January plan now. Which balance gets paid first, how much goes to it each month, and the date it will be cleared. A plan with a date is far easier to follow than a vague intention.
Talk to someone. Debt is easier to deal with in conversation than in silence. Being honest with your partner, your family or a coach takes much of the weight off.
How Can Financial Coaching Help You Have a Debt-Free Christmas?
Most of the people I work with already know that putting Christmas on a credit card is not ideal. Knowing is not the hard part. The hard part is that the decisions happen quickly, in busy stores and late at night online, during the most emotional month of the year.
Coaching helps by doing the deciding ahead of time. We work out your real number, build the savings plan, set up the accounts so it happens automatically, and check in through the season so the plan does not drift. We also talk honestly about the part that has nothing to do with arithmetic: the guilt, the expectations, and the feeling that a good Christmas has to be an expensive one.
What Personalised Strategies Does Fenske Financial Coaching Offer?
Fenske Financial Coaching & Planning starts with your actual spending, not a template. We look at your holiday costs, your existing debt and your savings goals together, then build a plan that pays for Christmas in full without touching your retirement savings or adding to your balances.
That might be full financial coaching, a single focused session on cash flow or debt, or the $9 Shameless Spender™ Coaching Community, where a new Money Move arrives three times a week to keep you on track through the season. There is no product being sold, no portfolio minimum, and no judgement about last year.
What Progress Actually Looks Like
The clients I am happiest for are the ones who tell me in January that nothing arrived on their statement that they were not expecting. Christmas happened, it was lovely, and it was already paid for.
That is the goal. Not a smaller Christmas for the sake of it. A Christmas that is finished when the day is over.
Christmas is around the corner. That is still plenty of time to make this the year it gets paid for in full.
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