How much do you plan to spend on holiday gifts this year? If you're anything like the average Canadian then you'll likely fork out nearly $700 on gifts this season, according to a recent report out of BMO. But experts warn you could end up spending a lot more if you don't plan ahead or take advantage of deals.
When it comes to holiday shopping, people always make costly errors, says Kendra Silvertson, a CFP with Vancouver-based Sora Group Wealth Advisors. Waiting until the last minute, for instance, is the classic money-draining mistake. In many cases, the gift you wanted to buy is sold out so you end up spending more on something else. "People say, 'I'll just grab something,' and that costs twice as much as what you expected to spend," she says.
Most people have no clue how much they should spend on gifts, she adds. They simply walk into the store and pick whatever looks good without understanding how that purchase will impact their finances.
Another common mistake is only tallying up the cost of gifts while forgetting about the rest of the money that typically gets spent over the holidays. While keeping a running tally of gifts is important, says Silvertson, don't forget to include the cost of other purchases such as wine for friends' parties and the holiday dinner you're hosting.
Tips to slash your spending
With a little work, it's can be fairly easy to keep spending in check. The first step, says Silvertson, is to create a list of all the people you think you will need to buy presents for and then decide if you really do have to get them a gift or if a card suffices.
For those people you are buying for, write down how much you want to spend on each person. Creating a list not only forces you to develop a shopping plan, but it helps you see if you're on budget.
Kerry Taylor, the author of 397 Ways to Save Money and the popular Squawkfox personal finance blog, suggests putting spending limits in place that every family member is comfortable with. "I wish more families would get with the limit," she says. "It makes so much sense. But people are too afraid to talk about money."
"Secret Santa" is another good family gifting strategy. Rather than buying gifts for everyone, each family member picks one person to a buy a present for. Everyone gets one great gift and no one's left with a massive credit card bill.
Search for deals
Another way to save is to search for deals, which thanks to the popularity of smartphones and retailer websites is easier than ever. When Taylor shops, especially for electronics, she double checks the competition's price while in the store. If you tell the store about the deal you've found they'll usually price match it - in some cases they may also take an additional 5% off.
Another option is to redeem loyalty points for gifts. You can buy almost anything using Air Miles these days, says Kerry, so if you're not planning to use the points for flying then you might as well get your Christmas gifts for free. "If don't use those points they'll expire," she adds. "So buy gifts for, literately, nothing."
If you are planning to start shopping now then consider taking advantage of Cyber Monday, which is on November 26. Typically on this day you can find huge online savings on everything from clothes to electronics. While some Canadians stores also offer deep discounts that day, it's mostly an American sales event.
Many U.S. retailers will ship to Canada, sometimes for free, but don't fret if your favourite store doesn't. There are several businesses in border cities that allow you to ship goods to their warehouse. You usually have to pay an additional $5 per package, but they'll give you a U.S.-based shipping address and they'll hang on to it for you. If you live close to the border the deals you can snag might be well worth the one or two hour drive. "I do that all the time," says Taylor.
Other ways to avoid paying full price include searching for store promo codes online or signing up to company email lists to get sales notices. In fact, Taylor says she's never paid the sticker price for any holiday gifts. Typically she saves 25% on all her holiday shopping.
However much you decide to spend, make sure it won't take a year to pay off the credit card. Silvertson says that people should be able to pay off their spending within a month or, at most, two months after the holidays.
She also suggests saving early. While it may be too late to start saving up for this year's holiday shopping grind, there's nothing stopping you from putting money away in January for next year.
Savers often end up spending every penny they've allocated to gifts, says Silvertson. Some even under spend. But in Silvertson's experience early savers rarely buy more than what they've budgeted for. "If you don't save or budget," she says, "it's easy to spend two or three times more than you wanted to."