Financial tips to recover from holiday overspending
Athabasca University financial expert offers expert tips on how to cut costs and recover from the holidays
Close to a quarter of Canadians overspend during the holidays.
That means a lot of folks have spent beyond their means, often resulting in a financial crunch come January. We connected with Dr. Eric Wang, a professor of finance with Athabasca University’s (AU) Faculty of Business, to share advice on how to recover from holiday overspending.
The Hub: Who is typically most vulnerable to holiday overspending, and why?
Dr. Eric Wang: Young parents fall for the lure of the better brands.
Minority groups are also more vulnerable to overspend because they have other extra celebrations. For example, I’m from China I have a two New Year’s—one is by solar calendar another one by the Lunar calendar, plus Christmas. We basically have three events to celebrate.
What should people do if they overspent during the holidays?
You have to become more self-disciplined and examine what is a need versus a desire. Use an Excel worksheet to map out all your expenses and plan for the upcoming year.
You should also share your financial goals and communicate with a close friend or family member. They can help you stay accountable, on-track, and help you celebrate your successes along the way—and you can do the same for them. You are not alone.
How should individuals or households go about setting a budget for the year?
Budgeting can done by following five simple steps:
- Track spending on regular basis.
- Gather all your required expenses such as rent, food, clothes, transportation, phone, utilities, vacation, entertainment, gifts, and education. Don’t forget to account for contingencies of unexpected costs and contributions to household savings. Next, classify your expenses as essential or non-essential. Those that are not essential can be trimmed down or cut to save money.
- Understand your income earnings and if there is any way to find extra money.
- Use the information in the first three steps to see if your income can cover all the expenses. If it does, then your balanced budget is set. If it doesn’t, take another look at the steps and finds ways to cut until your budget is balanced.
- A financial professional like a chartered financial planner can help you create—and stick to—a budget.
If someone incurs debt during the holidays, how should they prioritize what to pay off first?
Prioritize paying off debt with the highest interest rate first. If you have a credit card with a high outstanding balance along with an accumulating high interest, the results can be detrimental for your finances. So, the first thing to do is pay off the balance or at least reduce it.
You may ask for mortgage deferrals from your bank, or re-mortgage with another bank, or extend your mortgage loan period to obtain funds to pay down high-interest loans.
You can also look at all your low-cost loan sources—from banks, friends, or relatives—to pay down high-interest loans. Rely on the advice of a financial professional if you’re able. Once you have a plan, do not deviate.
Learn about AU’s Bachelor of Commerce, Finance Major program.
