The 7 worst financial habits of holiday shoppers

CALGARY, Dec. 10, 2013 /CNW/ - If your holiday shopping habits put you on the naughty list for overspending, impulse buying, and losing track of your purchases, you may be facing a post-holiday debt hangover in the new year.

With just over two weeks left before Christmas, the malls are filled with last minute shoppers scrambling to find the perfect gift.

Financial experts sound off on how to avoid the most common pitfalls that can cause finances to spiral out of control during the peak days of the holiday shopping season.

No plan / budget

Make a list - and check it twice! Without a plan or budget in place, people overspend as they have no idea how and when to limit purchases. This causes havoc for finances when the bills pile in.

"Ideally, to avoid holiday over-indulgence, a budget should be prepared well ahead of time," said Ambreen Sulman, a Certified General Accountant (CGA). Even with the festive season in full swing, it's not too late to make a plan for last minute purchases and still keep your spending in check. "Making a list of all the things you still need will help you avoid buying on impulse." A budget also forces you to think twice about an item - do you really need to buy your toddler-aged nephew three more expensive toys? How many cute mitts and scarves does one really need?

Don't shop without doing your homework, adds Sulman. "Look at different stores for competitive pricing or search online. This allows you to easily compare prices at different retailers in the comfort of your own home while limiting your time at the mall, lessening your chance of spending more."

Forgetting to track every dollar

With all the gifts, dinners and special events surrounding the holidays, it's easy to get carried away and overspend.

Do you know how much you have spent on the holidays so far? If you haven't tracked your purchases, it's not too late. View your up-to-date statement online or, if paying cash, make a list of your holiday expenditures to date. Chances are you may be surprised by how much you have already spent. Finding out you are over-budget now can give you a reality check before you are tempted to spend more.  "Be detailed," said Manfred Grunling, CGA. "Include the cost of cocktails at the office party, the added cost of hosting a holiday dinner, and the little things like wrapping paper, bows, gift bags and stocking stuffers," he said.

Racking up the credit card

Leave the plastic to Santa and his toys! It's easy to lose track with every swipe and forget about the cost of your purchases until the January bills come around.   Unless you pay off your entire balance in full, you're paying a high interest- making holiday shopping even costlier. Grunling advises to leave the cards at home and only pay cash. "Parting with cash is much more difficult than simply swiping a card," he said. "Look at your list and withdraw only the cash you need before you go shopping." Grunling also suggests to stay focused and stick to your list and budget.  "Limit your shopping time in each particular store.  Know what you want to buy and from where.  Always be aware of return policies.  If you do buy something on impulse and change your mind the next day, can you return it?" he said.

Going to the mall to get into the holiday spirit

Whether you are heading to the mall to get kid pictures with Santa or meeting a friend for a latte and window-shopping to the tune of Christmas carols - the mall is a costly place to be. Even with all your gifts purchased, you may be tempted to buy extra things, be influenced to spend more if with an extravagant friend or take advantage of a sale. "Holiday sales tend to highlight the fact we are saving money, but most likely we are just spending money on item we don't really need," said Sulman. "We are all guilty of impulse purchases and these magnify in the holiday season. Where the mood is festive and the malls are overcrowded, the jovial mood of the holiday season beckons us to spend a few extra bucks in exchange for happiness," she said.

Not setting boundaries

If you're on a tight budget or have a lot of people on your gift-list, have a chat with friends and family and set price limits to lower expenses. "Let them know that you are on a budget, suggest drawing names or host a potluck instead of buying gifts," advises Eva Nong, CGA. Don't overlook the importance of spending time with loved ones to get into the holiday spirit. "There are many great ways to spend time together that are affordable or all together free," she said. "Enjoy activities such as skating, sledding, holiday festivals or going for a walk and viewing Christmas light displays."

"Don't let money control you or your feelings," adds Jeff O'Rourke, CGA.  "Spending time with friends and family is what's important - the holidays are not meant to drive people into debt that they will have to work hard to pay off in the new year."

Skipping home-made gifts

Some of the best gifts are not costly, but thoughtful.  "Handmade certificates for movie nights at home, homemade baking and special photos are just a few easy ideas," said Grunling.  "For entertaining and Christmas dinners, consider starting a tradition of sharing special dishes.  Whether it's that superb salad or the perfect pie, sharing the cooking duties takes a lot of pressure off the hosting household.  And don't forget about crafts - whether it's handmade tree ornaments, gift baskets, advent calendars or a candy-case vase, the list is endless," he said.

Adopting the "I'll pay it off in January" attitude

O'Rourke says most people will not be able to pay off the large credit card bills all at once in January.  "This will result in added stress and costly interest," he said. "While we are in the holiday spending spirit, it's easy to put off thinking about how difficult it will be to pay down the debt. People have to remember that come the new year, they will have to make extra payments to pay off their holiday spending, on top of regular cost-of-living expenses." O'Rourke advises to resist impulse purchases and to remember it takes a lot of time to make and save money, but seconds to spend it. "Make sure you don't hurt yourself financially in the future," he adds. "Your holiday shopping habits could put you at risk of not being able to afford the necessities or an emergency in 2014."

These holiday tips are brought to you by the Alberta Accountants Unification Agency.  In Alberta, the Certified General Accountants, the Certified Management Accountants and the Institute of Chartered Accountants of Alberta are working toward unification under the new Chartered Professional Accountant designation. Find out more at www.albertaaccountants.org.

Image with caption: "Bad shopping habits can lead to a post-holiday debt hangover in the new year. (CNW Group/Alberta Accountants Unification Agency)". Image available at: http://photos.newswire.ca/images/download/20131210_C9435_PHOTO_EN_34805.jpg

SOURCE: Alberta Accountants Unification Agency

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