You've planned and saved for the gifts, but there's another potential budget-breaking aspect to the holidays – attending social functions.
If you think buying gifts can be costly, think about how many times you have been invited out or wanted to attend or host a party, not just at special times of the year like Christmas and Hanukkah, but year round.
The socializing stakes are high, to the point it can interfere with financial goals.
In fact, Canadians’ spending behaviours are strongly influenced by the people they are with, and it’s hurting their spending and savings goals, according to a recent survey by Credit Canada Debt Solutions and Capital One Canada.
Forty-four per cent of respondents said they were pressed by friends to spend more than they could afford when going out, while 22 per cent said they had commonly paid more than they should.
“If you have a budget and still aren’t feeling in control, the key is to keep track of where you’re spending your money, including on your vices [including social spending] and whatever else may be affecting your long-term goals of saving for a home, your kids’ education ...," says Brent Reynolds, Capital One Canada’s vice-president of marketing and analysis.
As consumers like 31-year-old Vancouver resident Krystal Yee know, attending social events is something that can be more fun than opening any gift. But Yee, a marketing and communications professional, says in a phone interview that she realized while in university that such socializing helped her costs mount. At age 24, she owed about $20,000 in student loans and other debt.
“University was really very social – you wanted to go out for dinner or the bar, but I didn’t have much physical evidence to show for it afterward,” she recalls. “I felt I wasted money away, even though I was having fun and doing what normal 24-year-olds do.”
In 2007, Yee started a personal finance blog, “Give me my five bucks back,” to hold herself accountable for her spending while working toward her goal of getting out of debt in a year and saving for a downpayment on a home. When she put together a budget, she realized joining friends for coffee and other get-togethers was costing her $200 or more a month.
At first, she was “embarrassed” to tell friends she was in debt – at the time it was a “taboo” topic” - instead just picking and choosing what event she’d participate in, or suggesting they did something together that was less costly.
The fear of being labelled a “party pooper” appears to be common, yet Canadians seem to be growing increasingly comfortable with shirking socializing due to budget constraints. In fact, 47 per cent say they have declined an invitation to go out with friends because they couldn’t afford it, according to the Credit Canada Debt Solutions and Capital One Canada survey.
Yee erased her $20,000 debt by taking budget measures such as allowing herself just $100 a month for entertainment, and bought a townhouse in 2011. These days, all her friends “are saving for something” and have become more open to outings that include having tea instead of alcoholic drinks, or going hiking instead of eating out.
Yee says she has a special strategy for Christmas and other holidays, so she doesn’t end up among the nearly two-third of Canadians, according to a TransUnion study released in October, who don’t save in advance for holiday shopping.
“The last thing you want to do is start a new year further in debt,” Yee says. “So I set aside money from every paycheque [$25] through the year, so I have a nest egg for birthdays, weddings, holidays. It really takes the pressure out of trying to come up with $300 to $400 in a short period of time.”
Here are other ways to survive the holiday social scene, without going into a spending hole.
Know where you stand:
Reynolds encourages using online tools to help you budget, track spending, determine if you’re in financial distress, and help you regain control of your money and resist whipping out a credit card while out with friends. Include in your budget what you plan to use on credit, and keep track of it. “Be well aware of terms and conditions, when interest charges start applying and how much it will cost you.” Set up your credit card and bank accounts to send you text or email alerts when you’ve reached your spending threshold.
Thinks gains, not losses:
“Focus on what you’re achieving rather than what you're missing out on, like going out for dinner,” says Yee. “It makes a huge difference if you readjust your way of thinking.”
Eat out smartly: Don’t get caught up in restaurant spending with friends. Instead of ordering a full meal, get a bowl of soup, split entrees with friends, skip the alcohol, or avoid appetizers and desserts, says Yee. Also, don’t be afraid to ask for separate bills, says Reynolds.
Find food alternatives: Eating out is one of the most common and costliest socializing expenses. Instead of heading to a restaurant, suggest a potluck at your house where everyone brings a dish.
Contribute without spending: Yee says a friend who couldn’t even afford to bring food to her potluck party offered to help clean up afterwards instead. So Yee got out of having to do dishes. Also, volunteer to bring music, movies or games if your budget doesn’t allow you to bring food or a bottle of wine to a get-together, Yee suggests.