Recovering from Overspending During the Holidays

The holiday season is always a great time for Canadians to splurge on themselves and their loved ones. But unfortunately, many fall into debt during the holidays. Approximately 7 out of 10 people overspend by about $300.

PWC estimates that the average Canadian will spend about $1,593 over the holidays but some may end up overspending more. You may have gotten caught up in the holiday craze and gone over budget. Luckily, there are ways to get back on track. Keep reading this guide on how you can recover your finances if you overspent during the holidays.


Why Do We Overspend During the Holidays?

There are many reasons why we overspend during the holidays. Retailers often have competitive sales at the start of the season like Amazon Prime Day, Black Friday, and Cyber Monday.

The scarcity of items on sale and our competitive nature work together to make us buy items we didn’t plan for. We may also end up buying expensive gifts for family members to fulfill our desire to be seen as a great parent, sibling, or child. One of the best ways to go about avoiding it is to have a clear budget before shopping.


How To Recover From Overspending

Your account balance may be looking a lot different than it did before the holidays, and this can spiral into other financial issues. So how can you get your financial life on track after overspending during the holidays? Keep reading for our ultimate guide on recovering from overspending.

1. Learn From Mistakes

Before you can start your post-holiday financial recovery plan, it’s important to assess and learn from your overspending during the recent holiday season. Do an evaluation afterward to know what worked and what didn’t so that you can plan better for future holidays.

Here are some questions to ask yourself:

  • How much was your final spend during the holiday season?
  • Which gifts were hits and which were misses?
  • What could you have done better to save more money?
  • What were the pitfalls that made you overspend?
  • Which events were the most fun for you and your family?
  • Did you spend more money with your debit card, credit card, or cash?

Analyze how you can plan and budget better for the next year’s holiday. Drop any events or things that weren’t worth the money and include items that you thoroughly enjoyed. This will ensure that your future holidays keep increasing in value for money.

2. Determine Your Financial Position

After a holiday full of overspending, it may be tempting to bury your head in the sand. Many people ignore their credit card and bank statements and try to live as if the holidays never happened. The sooner you face the financial damage of your holiday overspending, the faster you can recover from it.

Sit down with your statements and start crunching your numbers. Look at how much the balances are on your bank accounts and credit cards. Did you take out additional personal loans and payday loans? Did you borrow money from friends and family?

Write down all the creditors that you owe and the payment due dates, interest rates, and minimum payment amounts. This will give you a clear picture of what you owe and how to start tackling the debt.

3. Use the Snowball Method to Pay off Holiday Debts

Now that you know your financial standing, you can come up with a recovery plan. The first step you must take is to clear off any debt that you got into over the holidays. From the list you made above, establish what the minimum payment is on each debt you owe.

Pay these monthly to avoid late payment penalties. If you have extra money left over on your monthly budget, direct these towards paying off your debt. Use the snowball method of directing all extra funds towards the loan with the highest interest rate.

Once that is paid off, you can direct extra funds to pay the next loan with the highest interest and so on.

4. Put Your Gifts to Good Use

You can use the gifts you received over the holiday to get back on track financially. For instance, did you receive gift cards from loved ones? Rather than using them to buy luxuries, consider buying household necessities.

This will leave you with some extra money that you can use to pay off your debt. Some stores allow you to return gifts in exchange for something else. Perhaps you received a ski set but won’t be skiing any time soon. You may be able to exchange it for something else that you desperately need.

In case you can’t exchange gifts yet you don’t want to keep them, consider regifting them during the upcoming holiday. This will release some funds on your budget.

5. Create a Monthly Budget

If your holiday overspending has put you in debt, you may need to tighten your budget to recover your finances. This may be the time to cut your spending on non-essential expenses such as streaming services, eating out, vacations, etc.

Take a look at your current financial position and goals. Then, determine how much you should spend and save monthly. Follow our tips for how to create a monthly household budget that you can stick to.

6. Have Multiple Sources of Income

To pay off your debt and save enough money to enjoy your next holiday, you may need to increase your income. Rather than ask for a salary increase, you can find other sources of income. For instance, you can start an online business selling your skills or merchandise.

There is a booming freelancer marketplace online that allows professionals to make extra money as writers, graphic designers, assistants, etc. Websites like Amazon, eBay, and Etsy also make it easy for individuals to open up a shop and sell their goods globally.


How to Stop Overspending in the Future

Now that your bank account is on its way to recovery, you must have a plan to prevent future overspending. Below are a few tips you can follow for next year’s holiday season.

1. Keep a Separate Holiday Account

Get ahead of next year’s holiday season by starting to save now for the holiday. Based on your spending this year and your holiday plans for the next year, estimate how much you expect to spend in the upcoming holiday season. This will be your holiday savings goal.

Start a separate savings account for the holidays and put a percentage of your income into it every month. When the holidays come, make sure that you only spend the funds in your holiday account. Once the funds get finished─ your holiday spending must also stop. This will prevent you from overspending.

2. Track Holiday Spending

Once you start spending your holiday funds, make sure you track all your spending. You can use a smartphone app, a spreadsheet, or a traditional notebook and pen to write down everything that you buy. Tracking will keep you aware of how much money you have spent and what is left so that you don’t go over your budget.

3. Beat Retailers at Their Games

Retailers play sophisticated mind games to make consumers spend as much as possible during the holidays. Beat them at their own game by learning and avoiding their tricks. Buy gifts during the year, whenever you see a deal.

For instance, you can buy holiday decorations at the end of the season when they are on sale. Also, if you are prone to impulse buying, stick to online shopping. When online shopping, don’t fall for bulk buying discounts and free shipping thresholds. Only buy what is on your holiday list.

Do your research and find out the other tricks retailers use to get you to overspend so that you don’t fall for them.

4. Remember: Experiences Trump Gifts

Research has found that over time, people treasure experiences more than material gifts. This benefits your financial planning as during the holidays, you can plan priceless meaningful experiences with your loved ones.

If your holiday budget is limited, plan free activities for yourself and your family. For instance, you can play outdoor games at the park or beach, visit art galleries, attend free Christmas fairs, etc.


Start to Recover From Overspending During the Holidays

The last couple of years have been very hard for most Canadian households. So it’s understandable that many of us felt the desire to spoil ourselves and loved ones over the holidays. Don’t beat yourself up if you find yourself in a financial black hole after overspending during the holidays.

Instead, assess your financial position and come up with a recovery plan to get back on track. You may have to create and follow a budget to pay off your debt and save for the next holiday season.

Additionally, it is important to have a strategy in place to prevent overspending during future holidays. Check out our blog for more tips on budgeting and financial planning.

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Get your online loan, paperless & fast.

Quick Personal Loans for Canadians :

  • No credit investigation
  • No documents required
  • Repay in up to 90 to 120 days
  • $500 short-term loans