With the holiday season fast approaching, spending is increasing for many people. To discuss some ways to navigate the financial pressure of this time of year, here is Tyler Saito of Coast Capital Savings.
How do you think the pandemic is going to affect spending habits this season amid so much economic uncertainty?
We do think spending will be down Coast Capital partnered with the Angus Reid firm to conduct a poll in late October to get a sense of holiday spending, specifically for people in Greater Vancouver and Vancouver Island and not surprisingly 85% said that they plan to spend less this holiday season. Almost half of that number said that it is a direct result of the changes to their employment or financial situation because of COVID-19. On average this year, consumers said that they would plan to spend about 25% less, which means about $300 dollars less than last year. And not surprisingly about one half of the respondents said that they’ll spend less on holiday parties and travelling or outings this year.
How important and effective can it be to create a budget for holiday spending, and what are some tips on how to do that?
Well, budgets are important regardless of the time of the year, and absolutely around this time of the year budgets seem to become more important as we tend to be spending a little bit more money. One important rule we try to use is the 50-20-30 rule. This means 50% of your income should go to essentials, things like housing, food, transportation. 20% goes to your savings, and savings includes actual savings like a rainy day fund but also debt repayment. The last 30% can go to your personal needs and wants and personal expenses.
What are your words of caution, if any, as people start to do their holiday shopping? Many probably already started during Black Friday and Cyber Monday sales in effect for a few weeks, what should people be keeping in mind to control that spending?
Well 2020, has been a challenging year, and it is understandable that people will want to spend a little bit more on their loved ones, specifically to brighten up the season. But I guess the caution here would be not to spend beyond your means. The holiday season can already be a financially stressful time without factoring in the pandemic, so we really encourage people to find the balance between finding joy for your families but still remaining vigilant about your budget.
We’re talking about the hidden costs of the holiday season what is it that people might not realize that comes up for them that maybe leads them to go over budget every single year?
Quite often it’s the spur of the moment or impulse buys that often look like great deals that you’re getting and unfortunately it doesn’t become part of your budget so it’s just added on top of everything that you’re already spending. And I think with Black Friday and Cyber Monday and email inboxes full of great deals we need to be careful of which ones are really needs and which ones are maybe wants that are outside of our budget this year.