Whether you’re a financial professional, or their client, the big question on everyone’s mind right now is: Will Canadians stay on budget this Christmas? With several dozen articles written in the first 2 weeks of December speculating on what the average Canadian’s holiday budget will be, it is hard not to subsequently wonder what the numbers will be after the last minute shopping or impulse purchases are over. After all, large corporations wouldn’t be willing to invest millions in marketing specifically for the holidays if they didn’t expect a return. One has to wonder how many Canadians will give into the convenience and momentary stress relief that comes from forgetting about a budget and going over board, and how many will employed strategies to make their money go further such as home-made gifts or opting for a secret Santa draw in their family, and stay on budget.

Given that CIBC’s recent poll suggests that 31% of Canadians will use credit cards to complete their holiday shopping, as opposed to debit or cash, and RBC’s poll shows 37% will opt for using credit as well, we can deduct that at least 30% of Canadians will lose track of their budget even if they had the honest intention to say on it. Having said that, imagine that a person using credit cards to fund Christmas DID stay on budget, would credit still be a good option?

The suggested percentage to spend on Christmas is 1.5% of your annual take home income. For a person making $60,000 per year that means their holiday budget would be $900. If that nine-hundred dollars was put onto a credit card of 19.8% interest would be four-hundred and twenty-one dollars, meaning that the $900 worth of gifts just became $1,321! Furthermore, if you don’t have a solid repayment plan and decided that paying the minimum per month is the way to go, it would take you four years to pay off! Even if you doubled the monthly payments you would still be paying for it next Christmas. Who wants to do that?
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