Average Canadian plans to spend $643 on the holidays, says new study
'Stop spending money you don't have,' warns financial advisor Larry Short
Are you stressed out about how much you spend during the holidays?
Financial advisor Larry Short has some blunt advice.
"Stop spending money you don't have on things you don't need, trying to impress people who don't matter," he told CBC's St. John's Morning Show today. "You'll be able to sleep a lot better at night."
A new study by the Chartered Professional Accountants of Canada found that the average person plans to spend $643 on gifts. The study also found just over half of Canadians, 52 per cent, set a budget for holiday spending, and while 67 per cent of us say we don't expect to overspend, when we do go over budget, 69 per cent of us do it for our children or significant others.
Short, the spokesperson for the Chartered Professional Accountants of Canada, said it's important for people to keep an eye on their Christmas budget, because people often find themselves getting in over their heads.
"The vast majority of Canadians are pretty much tapped out when it comes to their credit cards, when it comes to their home equity line of credit and their mortgage," he said.
"Many Canadians have been using their home equity line of credit like an ATM," he said. "They have been borrowing against the value of their house, so they're not quite meeting expenses on their salaries, and when it comes to Christmas in particular, it tends to be the time that people tend to overindulge."
A lot of our overspending, Short says, is due to conspicuous consumption, or spending for show.
"People choose to do that because they feel like they have to, and the same sort of economic pressures or social pressures arise when it comes to spending for Christmas," he said, because people feel obligated to spend what they think others around them are spending, even if their levels of income are different.
"If your neighbour has more money than you, you will tend to want to have the same toys, the same lifestyle, the same travel, etc., that your neighbour will have," he said.
"And if you're living next door to somebody who has significantly more wealth than you, then your chances of you going bankrupt are very, very high."
You don't necessarily have to live as a miser, but on the other hand you don't necessarily have to have the latest, greatest thing that's out there.- Larry Short
People need to learn to resist social pressure and advertising in order to live a more realistic lifestyle, Short said. One way to avoid getting into trouble at Christmas is to have a plan: set a budget and stick to it. If it's too late for that this year, add up all the extra spending for the month, and then during the coming year set aside enough each month to avoid adding to personal debt next Christmas. Figure out — and this advice applies year-round — whether you really want or need something, or whether you just think you do.
"You still want to live your life," Short said. "You don't necessarily have to live as a miser, but on the other hand you don't necessarily have to have the latest, greatest thing that's out there. There has to be some point where you say, this is money that's going to be put to one side."
One more figure from the study: 11 per cent of respondents say they leave Christmas shopping to the last minute, a practice Short says he's all too familiar with.
"Driving around the bay many years ago to Carbonear to see my parents, and they only thing that was open was a gas station, so they got motor oil for that Christmas — which was really embarrassing because they don't have a car."