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En Francais
By Nancy Carr
Canadian Press
“My Money” Column
Saturday, November 22, 2003
TORONTO (CP) - With the holiday shopping season looming, a survey suggests almost 60 per cent of Canadians won't set a budget for spending on gifts, decorations, special events and travel.
Adrian Mastracci, investment counsel at
Vancouver based ‘fee-only’ KCM Wealth Management, says, “On the big-picture scene, incurring debt is the biggest impediment to accumulating a nest egg.”
And shoppers are less likely this year than ever to use cash to pay for their purchases, the recent Ipsos-Reid poll found, making it even easier to lose track of spending. Those holiday habits and others, in a year when Canadians in the survey said they plan to increase their spending by 25 per cent, could result in a major New Year's monetary shock, says financial planner Adrian Mastracci.
"You generally get these high figures coming out when it's time to pay the piper in January and people realize they went they went over (budget) by $500 or so," said Mastracci, president of Vancouver's KCM Wealth Management Inc.
"On the big-picture scene, incurring debt is the biggest impediment to accumulating a nest egg."
But most people don't think about the big picture when it comes to holiday gift-giving. Mostly, they think of convenience and spur-of-the-moment purchases and they can be prompted to spend more, especially on children.
Jackie Delfosse, a bank employee and mother of one who lives in Markham, Ont., was wandering downtown Toronto's Eaton Centre at lunch on Thursday, having bought one holiday gift so far this season.
The kids on her shopping list usually win out, she said.
"As a family, we don't buy for everyone. We exchange names and buy for one person, and then for the kids we just go crazy," Delfosse said.
But for her, unlike 30 per cent of Canadians polled, "going crazy" doesn't include using a credit card.
"I stay away from Visa because I just don't want to have to deal with paying it come January," said Delfosse, who splits her purchases between her debit card and old-fashioned cash.
The same Ipsos-Reid poll, commissioned by credit and debit card transaction processor Moneris Solutions, found that cash will likely be the third most popular way for people to make purchases this holiday season, with 26 per cent of people planning to pay in currency.
"It's really the first time that we've seen cash come in dead last in terms of the three major forms of payment," said Kevin Tait, communications manager at Moneris.
"Debit has pretty much held the course, cash has come way down and credit seems to be the major gainer when it comes to Christmas shopping."
In the poll, carried out in late October, 27 per cent of credit card users said they intended to use plastic because they collect loyalty points.
Flight and food points aside, using credit usually means getting stung with double-digit interest fees in January, and Mastracci and most other financial planners advise against it. Instead, he tells his clients to withdraw shopping money from a special holiday fund.
While it may be too late to amass any kind of meaningful holiday cash this year, consumers can start the new year off on the right foot by stashing away $10 or $15 a week throughout the year. Even $25 a week starting in September will yield almost $400 by Christmas.
Debit cards aren't foolproof either, Mastracci said.
"I would think that if a person just uses a debit card, they're probably not keeping as much track of their spending as they normally would," Mastracci said.
"It is easier to say, 'I'll just use a debit card' instead of having the real cash in your pocket. If you don't have the cash in your pocket, you don't spend it."
And with some banks offering inexpensive overdraft protection, spending when there's no more money in the bank is easier than ever. The debit fees that banks can charge also increase the price of every gift.
The poll also found that 45 per cent of us are self-described last-minute shoppers.
Sarah Thompson, who bought Christmas tree decorations Thursday in a Disney Store, said she tries not to fall into that category.
"If you do last-minute Christmas shopping, it's more of a rush to get everything done and it doesn't matter how much you spend, you need to get the gifts and it doesn't matter at what cost," said Thompson, pregnant with her first child.
But Mastracci warned that however well-intentioned early shoppers are, they can get caught in a holiday spending trap.
"Some people say if you start early you go back too often, so you generally wind up over spending," he said.
"Some go out starting with the sales in October and the next time you see (a sale) you buy something for somebody else, so by the time you're done you really haven't kept track of what whatever it was you spent."
But factoring in the busy shopping centres and higher stress levels as the holidays approach, Thompson said November shopping is easier.
"I think there's definitely an advantage to coming out a little bit earlier. The malls are a little less crowded, which is always a bonus, and you can take your time and shop around."
Some facts on Canadians' holiday spending:
- 58 per cent of Canadians polled by Ipsos-Reid said they didn't intend to stick to a budget this holiday season.
- 17 per cent of those who have a budget think they will exceed it.
- 73 per cent say they'll spend the same amount on gifts - $761 - as they did last year. Fourteen per cent plan to spend less, 12 per cent plan to spend more.
- 32 per cent plan to make gift purchases online, compared with 23 per cent who bought online last year.
- 74 per cent comparison-shop.
- 43 per cent plan to make holiday purchases using a debit card, 30 per cent plan to use credit, 26 per cent plan to use cash.
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